Economic Policy and Performance Under the Trump Administration: A Complex Legacy

The economic record of Donald Trump’s presidency (2017–2021) remains a highly contested topic in both academic and policy circles. During his time in office, the U.S. experienced significant economic growth, a historically low unemployment rate, and a soaring stock market, at least until the onset of the COVID-19 pandemic. However, the long-term consequences of his administration’s tax policy, deregulation efforts, and trade strategy have prompted considerable debate regarding the sustainability and equity of the gains achieved during his tenure.

Economic Expansion and the 2017 Tax Reform

In the early years of the Trump presidency, the U.S. economy saw consistent growth. According to data from the Bureau of Economic Analysis (2021), real GDP expanded at an average annual rate of approximately 2.5% from 2017 to 2019. One of the administration’s most significant economic policy initiatives was the passage of the Tax Cuts and Jobs Act of 2017, which lowered the corporate tax rate from 35% to 21% and made several adjustments to individual tax brackets. Supporters, such as analysts from the American Enterprise Institute (2018), argue that these tax cuts stimulated investment and contributed to economic expansion. However, the Congressional Budget Office (2018) projected that the reform would add nearly $1.9 trillion to the national debt over a decade. Critics, including economists at the Brookings Institution (2019), contend that the tax cuts disproportionately benefited corporations and high-income earners, with limited evidence of significant long-term wage growth or income mobility for middle- and lower-income households.

A central component of the Trump administration’s economic agenda was the widespread rollback of federal regulations, particularly in the energy, financial, and environmental sectors. Proponents argued that deregulation reduced burdens on businesses and encouraged economic activity. The Wall Street Journal (2019), for instance, credited this approach with increasing business confidence and capital expenditure. Labor market indicators also improved during this period. Data from the Bureau of Labor Statistics (2021) show that by late 2019, the unemployment rate had fallen to a 50-year low of 3.5%, while wage growth began to accelerate modestly. However, analysis from the Pew Research Center (2020) suggests that job creation was concentrated in low-wage industries and that broader income inequality remained a persistent issue.

Trade Policy and Market Volatility

Another hallmark of Trump’s economic policy was his confrontational approach to international trade. His administration initiated a trade war with China, imposing tariffs on billions of dollars’ worth of goods in an effort to reduce the trade deficit and protect domestic industries. While this strategy appealed to nationalist economic sentiments, its practical outcomes were mixed. Research from the National Bureau of Economic Research (Amiti, Redding, & Weinstein, 2020) indicates that the tariffs had limited impact on the overall trade deficit but negatively affected U.S. agricultural exports and manufacturing sectors dependent on global supply chains. Furthermore, the unpredictable nature of trade negotiations created significant market volatility. Despite overall stock market growth during Trump’s term, investor confidence fluctuated sharply during tariff announcements and escalating tensions with major trading partners.

The final year of Trump’s presidency was dominated by the economic fallout of the COVID-19 pandemic. The U.S. economy experienced a sharp contraction in 2020, with GDP declining by 3.4% and unemployment peaking at 14.7% in April, according to BEA (2021) and BLS (2021) data. In response, the Trump administration signed the CARES Act, a $2.2 trillion relief package that included direct payments to individuals, enhanced unemployment benefits, and small business loans. While the scale of the relief effort was unprecedented, many critics argued that the federal response to the public health crisis lacked coordination and consistency. Reports from The New York Times (2020) and The Washington Post (2020) highlighted issues related to testing, unclear communication, and delays in aid distribution, all of which may have exacerbated the economic downturn.

Donald Trump entered office in 2017 with bold economic promises: to create jobs, boost wages, cut the national debt, and eliminate inflation. His administration’s rhetoric framed economic reform as central to restoring American greatness. However, upon closer examination, many of these promises either failed to materialize or were overshadowed by rising inequality, national debt, trade disruptions, and inflationary pressures. While short-term growth occurred, the long-term consequences of Trump’s economic policies continue to weigh heavily on the U.S. economy.

Tax Cuts and the Uneven Distribution of Gains

The signature legislative achievement of the Trump administration, the Tax Cuts and Jobs Act of 2017, was intended to spur widespread economic growth by reducing the corporate tax rate and providing temporary relief for individuals. While it did provide a short-term boost to GDP growth, the benefits were largely skewed toward high-income earners and corporations. According to the Brookings Institution (2019), the cuts did little to increase worker wages or meaningfully reduce income inequality. 

Furthermore, the Congressional Budget Office (2018) projected that the tax cuts would add approximately $1.9 trillion to the national debt over a decade, undermining Trump’s stated goal of reducing the deficit.The American Enterprise Institute (2018) noted some initial uptick in business investment, but this momentum was short-lived. Wages stagnated for many working-class Americans despite the White House’s claims that tax relief would “trickle down” to workers.

Deregulation and Economic Fragility

Trump’s aggressive deregulation strategy, especially in the environmental and financial sectors, was aimed at reducing government overreach and boosting corporate productivity. However, critics argue that it sacrificed long-term economic stability for short-term gains. The Wall Street Journal (2019) praised early deregulation efforts for helping businesses cut costs, but environmental and consumer protection advocates warned of future costs tied to weakened oversight. Moreover, while unemployment did reach historic lows before the pandemic, data from the Pew Research Center (2020) show that much of the job growth occurred in low-wage sectors with limited job security. The overall structure of the labor market remained fragile, and economic inequality continued to widen.

Trump’s promise to reduce the U.S. trade deficit and protect American jobs through aggressive tariffs largely failed to achieve its objectives. The U.S.-China trade war disrupted global supply chains, raised consumer prices, and hurt American farmers and manufacturers. According to a National Bureau of Economic Research (Amiti, Redding, & Weinstein, 2020) working paper, the tariffs caused a decline in U.S. imports and exports without significantly altering the trade balance. Rather than “winning” the trade war, the administration’s approach contributed to heightened economic uncertainty and volatility in financial markets, undermining business confidence and investment during a critical period of global economic transition.

The most dramatic collapse occurred in 2020 with the onset of the COVID-19 pandemic. While the administration did pass the CARES Act, a $2.2 trillion relief package, the overall federal response was widely criticized as disorganized and inconsistent. Reports from The New York Times (2020) and The Washington Post (2020) point to delayed testing, contradictory public messaging, and a slow rollout of economic support, all of which contributed to a deeper and more prolonged economic contraction. According to the Bureau of Economic Analysis (2021), GDP fell by 3.4% in 2020, and unemployment surged to 14.7% in April of that year (Bureau of Labor Statistics, 2021). Despite a brief recovery in late 2020, millions of Americans continued to face job insecurity, housing instability, and financial strain well into the following year.

Inflation and Broken Promises

Perhaps most notably, Trump failed to “eliminate inflation,” a claim frequently made during his 2016 campaign. While inflation remained modest in the early years, by the end of his presidency, structural issues, such as disrupted supply chains, high federal spending, and weak public health infrastructure, set the stage for the inflationary spike that followed in 2021. Although much of the inflation surge occurred post-Trump, economists argue that his administration’s handling of the pandemic and deficit spending contributed significantly to the conditions that enabled it (CBO, 2018; Brookings, 2019).

The Trump administration's economic policies produced a mixed legacy. On one hand, the economy experienced notable growth, low unemployment, and corporate expansion in the years preceding the pandemic. On the other, questions remain about the fairness and long-term effects of tax cuts, the sustainability of deregulation, and the broader implications of the administration’s trade and pandemic responses. As such, Trump’s economic legacy continues to provoke debate among economists, policymakers, and scholars alike. Despite promises of widespread prosperity, Trump’s economic policies left the U.S. with deepened inequality, rising debt, and an unstable recovery. While there were moments of growth and historically low unemployment prior to the pandemic, the administration’s overreliance on tax cuts, deregulation, and protectionism ultimately failed to produce the sustained economic revitalization it pledged. In the aftermath, many Americans are grappling with the long-term economic consequences of these decisions, underscoring a gap between political rhetoric and economic reality.

References 

American Enterprise Institute. (2018). The economic impact of the Tax Cuts and Jobs Act. https://www.aei.org

Amiti, M., Redding, S. J., & Weinstein, D. E. (2020). The impact of the 2018 tariffs on prices and welfare (NBER Working Paper No. 25672). National Bureau of Economic Research. https://www.nber.org/papers/w25672

Brookings Institution. (2019). Who benefited from the 2017 Tax Cuts and Jobs Act? https://www.brookings.edu

Bureau of Economic Analysis. (2021). Gross Domestic Product, Fourth Quarter and Year 2020. U.S. Department of Commerce. https://www.bea.gov/news/2021/gross-domestic-product-fourth-quarter-and-year-2020-second-estimate

Bureau of Labor Statistics. (2021). The employment situation—April 2020. U.S. Department of Labor. https://www.bls.gov/news.release/archives/empsit_05082020.htm

Congressional Budget Office. (2018). The budget and economic outlook: 2018 to 2028. https://www.cbo.gov/publication/53651

National Bureau of Economic Research. (2020). Amiti, M., Redding, S. J., & Weinstein, D. E. The impact of the 2018 tariffs on prices and welfare (NBER Working Paper No. 25672). https://www.nber.org/papers/w25672

Pew Research Center. (2020). Trends in income and wealth inequality. https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/

The New York Times. (2020, July 1). Trump’s chaotic response to coronavirus weakened economy. https://www.nytimes.com

The Wall Street Journal. (2019, December 31). The Trump economy’s strengths and risks heading into 2020. https://www.wsj.com

The Washington Post. (2020, March 27). What’s in the $2.2 trillion coronavirus stimulus package. https://www.washingtonpost.com