The U.S. economy has continued to grow despite significant headwinds from President Donald Trump's policies, but growth and inflation could have been considerably better in their absence, according to analyses from economic institutions. Trump's administration has implemented large, shifting tariffs on imports, restricted immigration, and initiated a conflict with Iran that has impacted global energy markets.
US GDP rose at a 2 percent annual rate in the first quarter of 2026 and a 2.1 percent pace in 2025. The unemployment rate remained low at 4.3 percent, and wages outpaced inflation throughout 2025. However, real wages fell in the month prior to the report, as annual inflation reached 3.8 percent.
Economic analysts have attempted to model the U.S. economy's performance without these specific policies. The Peterson Institute for International Economics estimates that tariffs reduced America's GDP growth rate in 2025 by 0.23 percentage points. The Economist suggests this figure may understate the impact, as it doesn't account for increased investor uncertainty, which has led businesses to reduce capital investment. Excluding AI-related sectors, business investment fell at a 3 percent annualized rate over the last four quarters, shaving approximately 0.4 percentage points off 2025 GDP growth, according to The Economist's analysis.
Furthermore, a Brookings Institution report indicates that reduced immigration last year may have decreased U.S. GDP by as much as 0.26 percentage points. Combined, these trade and immigration policies may have reduced economic growth by about 0.9 percentage points in 2025. The precise impact of the conflict with Iran on 2026 growth remains unclear, though most analysts believe it has marginally dampened output.
On inflation, a report from the Dallas Federal Reserve suggests that Trump's tariffs have increased import costs, which businesses have partially passed on to consumers. The analysis indicates that without tariffs, the core inflation rate in March would have been 2.3 percent instead of 3.2 percent. Federal Reserve economists estimate that a three-month closure of the Strait of Hormuz could add 0.35 points to headline inflation, rising to 1.47 points if the waterway remains closed for nine months. Without these trade and conflict-related impacts, inflation would likely be over one point lower and closer to the Federal Reserve's 2 percent target.
Persistent inflation has also constrained the Federal Reserve's ability to lower interest rates, leading to increased mortgage rates since the conflict in Iran began in late February. The economy's current resilience is largely attributed to factors unrelated to Trump's policies, such as the boom in the artificial intelligence sector, which has driven investment and stock values, and the ongoing normalization of supply chains following post-COVID disruptions.