The numbers don’t lie. The U.S. economy, once expected to roar under a second Trump administration, is instead losing steam.
GDP growth is lagging, consumer confidence is fading, and businesses are pulling back on hiring and investment.
The much-promised economic boom—driven by tax cuts and deregulation—has yet to materialize, and the policies that were supposed to drive growth are now creating uncertainty.
Why The Slowdown Is Happening Now
For months, Washington and Wall Street ignored the warning signs. The labor market remained strong, corporate earnings held steady, and consumers kept spending. But that resilience is starting to wear thin.
The latest GDP data shows 2.3% growth for Q4 2024, a slowdown from previous quarters. Retail sales declined 0.9% in January 2025, following a 0.7% increase in December 2024. Spending on big-ticket items like cars and appliances has been hit hardest. Credit conditions are tightening as lenders brace for potential economic turbulence, and the housing market remains under pressure, with mortgage rates hovering around 7%.
Tariffs, Budget Cuts, And Economic Paralysis
One of the biggest drags on growth is policy uncertainty. The administration’s push for new tariffs has disrupted supply chains and increased costs for manufacturers, leading some to delay expansion plans. Proposed immigration restrictions have added concerns about labor shortages in key industries, increasing business costs.
At the same time, government spending cuts are reducing economic support. Federal hiring has slowed, infrastructure spending has been reduced, and agencies are downsizing to balance the budget. While these cuts were intended to offset tax breaks for corporations, they are also removing capital from the economy at a fragile moment.
Wall Street And The Fed Are On Edge
The stock market, which had been riding high on AI enthusiasm and corporate stock buybacks, is now feeling the effects of the slowdown. The S&P 500 has been volatile in recent weeks, with bank stocks under pressure as loan demand weakens.
The Federal Reserve, meanwhile, remains cautious. Inflation has eased, but interest rates remain elevated, and cutting them too soon risks reigniting price pressures. Fed officials have indicated they are unlikely to lower rates until at least the second half of the year, leaving businesses and consumers to navigate higher borrowing costs.
A Recession Isn’t Inevitable—But Risks Are Growing
Could the economy pull through? Possibly. But without a clear strategy from Washington, the risks are growing. The administration is betting that deregulation and tax cuts will be enough to reignite growth, but so far, businesses remain hesitant.
If things continue on this trajectory, expect slower wage growth, continued market volatility, and increased economic uncertainty in the months ahead. The U.S. economy isn’t collapsing—yet. But the trendlines are moving in the wrong direction, and no one in Washington seems to have a plan to turn them around.
