Six months into President Donald Trump’s return to the White House, the full weight of his economic agenda is beginning to show.
While his allies herald the arrival of the “Trump Economy,” a week of volatile data and mixed signals suggests storm clouds may be gathering.
A historic surge in tariffs has brought in record revenue to federal coffers, but with inflation inching up and job creation sharply revised downward, signs of economic fragility are mounting. The disconnect between booming tech stocks and slumping hiring figures has underscored a two-speed economy—one that benefits from artificial intelligence innovation while struggling to preserve broader momentum.
AI Boom Masks Broader Market Weakness
Markets kicked off the week riding high on blockbuster earnings from tech giants Microsoft (MSFT) and Meta (META), whose advances in artificial intelligence have helped propel the Nasdaq to new heights. Microsoft briefly touched a $4 trillion valuation, only the second company in history to do so.
But as the week wore on, gains in the AI sector were not enough to counterbalance broader economic anxieties. UPS (UPS) declined to issue a full-year forecast amid uncertainty tied to trade policy, sending its stock tumbling. Meanwhile, the Federal Reserve kept interest rates unchanged, citing inflation risks and calling the labor market “solid”—a view that would soon be tested.
By Thursday, President Trump introduced a sweeping new round of tariffs, pushing the effective import tax rate above 15%. Then came Friday’s jobs report, and with it, a sobering jolt to the market’s optimism.
Tariffs Deliver Billions—but at a Rising Cost to Consumers
Tariffs are now pouring money into the U.S. Treasury at unprecedented levels. In July alone, the government collected more than $29 billion from import duties. But that windfall comes with a growing cost to households.
According to economists at Yale University’s Budget Lab, the average American household is on track to pay an extra $2,400 this year because of these levies. Clothes and shoes—products heavily imported—are already seeing price jumps of up to 40% in the short term. The long-term increase is expected to be closer to 17% for clothing and 19% for footwear.
Despite Trump’s claim that foreign exporters would bear the brunt, U.S. consumers are increasingly footing the bill. The White House’s move to ease tariffs on select regions, such as the Falkland Islands, drew attention not just for the political symbolism but for highlighting how even remote areas have been swept into Trump’s global trade overhaul.
Trade talks with China and the EU offered little concrete progress. Negotiations in Sweden between Washington and Beijing ended without an extension of the truce expiring August 12. With virtually all major U.S. trading partners now facing higher tariffs, companies are growing uneasy.
Jobs Data Undercuts Trump’s Economic Messaging
The starkest warning sign came Friday, when the Bureau of Labor Statistics revealed the economy added just 73,000 jobs in July—far fewer than forecast. Worse, May and June figures were sharply revised downward, showing a combined drop of more than 250,000 jobs from earlier estimates.
Without gains in health care hiring, the broader economy would have posted net job losses over the past three months. The unemployment rate edged up to 4.2%, and labor market slack is increasing despite a shrinking workforce—a dynamic attributed largely to immigration restrictions.
The revisions were the largest outside of the 2020 pandemic in over four decades. The news prompted Trump to fire the BLS commissioner, claiming the numbers were manipulated, though no evidence has surfaced to support that assertion.
“This labor market is not on solid footing,” said BlackRock’s Rick Rieder, who now expects the Federal Reserve could cut interest rates by half a percentage point as early as September.
Tariffs, Turmoil, and the Road Ahead
Trump has reshaped the economy in just half a year, using tariffs, deregulation, and sweeping tax legislation to mold the system in his image. But this transformation carries political risk. With household costs rising and job growth slowing, voters are starting to feel the strain.
Despite White House insistence that the best is yet to come, cracks are appearing. The full inflationary effect of tariffs is likely still months away. Midterm elections loom. And with Trump fully owning this economy, its trajectory may define not just his second term—but his legacy.
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