While President Donald Trump oversaw strong U.S. economic growth during the third quarter of 2025, some concerns with the economy still remain heading into 2026, an analyst told the Daily Caller News Foundation.
Trump has made several major economic policy moves since returning to the White House in January 2025, including rolling out sweeping tariffs on various U.S. trading partners, extending major tax cuts and reducing the federal workforce. Jason Sorens, a senior research fellow at the American Institute for Economic Research (AIER), told the DCNF that while the U.S. economy has shown solid growth over the past year, it is still facing potential headwinds, such as “gradually rising” unemployment and elevated inflation rates contributing to “mild stagflation.”
“The tale of 2025 has been solid [real gross domestic product (real GDP)] figures, powered by domestic consumption, alongside gradually rising unemployment and a break in the downward inflation trend, with inflation settling significantly higher than the Fed’s [Federal Reserve’s] target,” Sorens told the DCNF. “I would call it ‘mild stagflation.’ Unemployment is still low but if it rises even more, that would suggest the economy is now operating below full capacity.”
The U.S. economy expanded at a greater-than-expected pace in the third quarter of 2025, according to an initial reading from the U.S. Bureau of Economic Analysis (BEA) published on Dec. 23. Real GDP increased at an annualized rate of 4.3% in the third quarter of the year, with the growth largely being driven by an increase in consumer spending, the BEA reported.
“When President Trump was sworn in, America was grappling with a generational inflation crisis, anemic growth, sky-high interest rates, and declining real wages,” White House Spokesman Kush Desai told the DCNF in a statement. “In the past year, inflation has cooled, economic growth has accelerated, interest rates are lower, and real wages have finally increased – much work remains ahead in the new year, but Americans can rest assured that the best is yet to come as President Trump’s policies continue taking effect.”
White House Press Secretary Karoline Leavitt wrote in a Dec. 23 X post in response to the most recent GDP numbers that Trump’s economy “continues to defy expectations.” Meanwhile, Republican Texas Rep. Lance Gooden wrote in a social media post on the same day that “no amount of Democrat gaslighting can mask the booming Trump economy!”
Trump announced in early April that he was imposing “Liberation Day” tariffs on a spate of foreign countries, claiming the new duties would help to “make America wealthy again.” Some American businesses have reportedly recently expressed worries about having to grapple with potentially negative impacts from the president’s tariffs in 2026, such as higher consumer prices.
“Private investment fell nearly 15% on an annual basis in the quarter after Trump announced the ‘Liberation Day’ tariffs, the biggest one-quarter decline outside a recession since 1988,” Sorens explained to the DCNF. “Declining residential, factory, and office construction has offset growth in software and equipment. The pullback in tariffs may have helped Q3 [third quarter] investment remain basically stable.”
“The [artificial intelligence (AI)] boom has helped power the stock market higher, but the dollar has fallen, which helped global stocks outperform the U.S. this year,” Sorens continued. “Overall, it’s unclear whether the AI boom and permanent tax cuts will outweigh the negative effects of tariffs, industrial policy, and general federal meddling in the operation of private businesses.”
Trump signed an executive order on Dec. 11 which aims to “sustain and enhance” the U.S.’ “global AI dominance through a minimally burdensome national policy framework for AI.” National Economic Council Director Kevin Hassett told CNBC in November that AI has generated a “quiet time” in the nation’s job market, adding that the market has been giving off “mixed signals” in 2025.
Moreover, the Trump administration has been moving to drastically shrink the federal workforce in 2025. Total federal government employment in the U.S. decreased by 6,000 in November, following a decline of 162,000 federal government jobs in October, according to Bureau of Labor Statistics (BLS) data released on Dec. 16.
Total nonfarm payroll employment was little changed in November, rising by 64,000, the BLS reported. Moreover, the Consumer Price Index (CPI), a broad measure of the prices consumers pay for everyday goods, rose 0.2% on a seasonally adjusted basis over the 2 months from September 2025 to November 2025, according to BLS data released on Dec. 18.
Goldman Sachs Research economists forecast in a Dec. 22 report that U.S. economic growth is likely to accelerate in 2026 due to factors such as reduced “tariff drag,” tax cuts and improved financial conditions. The report projected the U.S. will experience 2.6% real GDP growth in 2026, higher than the previously expected 2%.
Additionally, the Federal Reserve announced on Dec. 10 it was lowering interest rates for the third meeting in a row. Trump-appointed Fed Gov. Stephen Miran said in a Dec. 15 speech he thinks the Central Bank has been “keeping interest rates too high because of the phantom inflation of portfolio advisory fees.”
Several polls released in late 2025 have shown many voters hold a negative view of Trump’s handling of the economy. An AP-NOPC survey released on Dec. 11 showed that seven in 10 U.S. adults described the current state of the U.S. economy as “poor.”
Recent reports have indicated that U.S. consumer sentiment is weakening. The Conference Board reported on Dec. 23 that its Consumer Confidence Index had declined by 3.8 points in December to 89.1, down from 92.9 in November.
“Republicans promised to lower the high cost of living on day one,” House Minority Leader Hakeem Jeffries wroteTuesday in a post to X. “A year later, costs have gone up and life is more expensive. You deserve better.”
However, a Harvard CAPS/Harris poll released on Dec. 8 found that the majority of Americans trust the GOP and Trump’s ability to handle the economy more than they trust Democrats.
Trump alleged on Dec. 2 that the word “affordability” is simply a “Democrat scam,” also saying he does not believe Democrats want to help boost the nation’s economy. His comments came just days after he dubbed himself the “affordability president” in a post to Truth Social.
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