Trump’s claims versus reality on the economy and tariffs

Even as the Trump administration scrambles to wage war against Iran, it also must figure out a new tariff regime that can survive Supreme Court scrutiny. As usual with President Donald Trump, it’s necessary to weed out his hype and braggadocio from reality.

In late February, six Supreme Court justices -- three conservative and three liberal-- struck down President Trump’s use of an international emergency powers statute to impose broad tariffs on imports from across the world. That was not much of a surprise, since that statute doesn’t even mention the word “tariff” and legal experts had been predicting this outcome for many months.

Undeterred, President Trump taunted the justices, calling them a "disgrace," “fools” and “lap dogs,” and immediately announced he would rely on a different statute — Section 122 of the Trade Act of 1974 — another never previously used provision to impose new, near-universal 15 percent tariffs on most countries.

But not so fast: according to some legal experts, these new tariffs are illegal too. The Trump administration is misconstruing that section of the statute to apply it to the large trade deficit that the US has with many countries, but once again, that’s not what this specific section is about. It was passed in the 1970s over concerns about financial imbalances, not trade imbalances, focused on monetary exchange rates and the gold standard, not trade. The president’s own lawyers admitted as much in a filing in the earlier Supreme Court case.

The pattern in past disputes has often involved pushing the limits of statutory authority and leaving it to the courts to sort out. The administration’s next steps will determine whether this becomes another confrontation over the boundaries of presidential power.

The economy is showing signs of struggle…before a war in the Middle East

Tariffs are not the only economic area in which the Trump administration is engaged in a struggle between his own overhype and reality. While by some measurements the Trump economy did OK in its first year, one of the reasons why the Supreme Court’s ruling is such a blow to Trump’s economic strategy is that the tariff revenue – which is a tax on US-based companies that import products from foreign nations -- was supposed to help pay for the large and growing federal debt. The tariffs were projected to bring in approximately $200 billion per year and $2 trillion over ten years to the federal treasury. But now the White House must refund more than $100 billion in tariffs that thousands of businesses paid.

The federal debt -- the cumulative annual deficits of years past -- is already at $37.2 trillion and is projected to rise by an average of about $2 trillion every year to a total of $47 trillion by 2030, and $59 trillion by 2035. To his credit, Trump’s budget deficit in his first year improved slightly over his predecessor’s, but his first administration contributed greatly to both the climbing debt and annual deficits, since in 2017 his Tax Cuts and Jobs Act temporarily cut corporate taxes from 35% to 21%, and cut marginal tax rates for individuals in most tax brackets.

As a result of these temporary tax cuts, the federal government had a budget deficit of $779 billion in 2018, and then the deficit grew most years over the next eight years to more than double the 2018 deficit through 2025. Then Trump’s One Big Beautiful Bill Act (OBBBA), which he signed into law last July, made the nation’s account balances even more precarious by making these lower tax rates permanent, which further locked in budget deficits for years to come that will add significantly to the national debt.

Even if the Supreme Court had not struck down Trump’s tariffs, compared to America’s gnarly budgetary reality the amount earned by Trump’s tariffs was a drop in the bucket, a mere 5.4% of the current $37 trillion debt.

So Donald Trump has not been straight with the American people about either the small amount of money that his tariffs have been generating compared to the size of the debt, or about the negative impact of his OBBBA law from last July that made the tax cuts permanent and will be adding even more to the federal debt.

Do tariffs work? Their impact so far

Beyond the Supreme Court ruling, the tariffs had been in operation for nearly a year, which is enough time to generate some measurements to provide a bit of clarity on whether the tariffs have been actually working as intended. Trump, of course, bragged that they were working spectacularly. In his State of the Union address in late January, he claimed that he had engineered a “turnaround for the ages.” But again, the hype has not really been borne out by reality.

For example, job growth in Trump’s first year was abysmal. The economy added only 181,000 jobs in all of 2025, far fewer than the nearly 1.5 million jobs that were added in 2024 when Joe Biden was president. Trump said in his State of the Union “We have more jobs, more people working today than ever before in the history of our country,” but that was a slick trickster’s con because the current US population is also the largest in history, at more than 342 million people. By that measurement, Biden as well as most other presidents who didn’t have an economic downturn during their term could make the same claim.

More telling is that labor force participation — those employed or actively looking for a job — has changed little under Trump, declining a bit from 62.6 percent in January 2025 to 62.5 percent this January.

Meanwhile, even more alarming is that the unemployment rate rose in 2025, from 4.0 percent in January 2025 to today’s 4.3 percent. The unemployment rate among African Americans remains even more elevated at 7.2 percent. But the labor market remains jittery, and even though 130,000 jobs were added in January, the unemployment rate is predicted to climb still higher in 2026 to 4.6%. An increase of 0.3% might seem small, but that translates into another half a million Americans out of work.

However, a bigger hit against Trump’s credibility is that he boasted that his tariffs would create more American manufacturing jobs. Trump has staked his reputation on increasing manufacturing jobs, but those jobs have actually declined a bit under Trump, from a high of nearly13 million in 2023 under Biden to 12.6 million today. In 2025 about 108,000 manufacturing jobs were lost. This decline may well have been the result of the economic uncertainty unleashed by Trump’s chaotic tariffs, which has had the effect of deterring investment.

The tariff burden on everyday Americans

Another clash between reality and Trump’s hype is in the area of inflation and prices. “Prices” is the cost of things in the here-and-now, “inflation” is the increase in prices over time. Under Trump, inflation overall has mostly remained in check, but Trump has insisted that the cost burden of the tariffs would be borne by foreign companies exporting into the US.

However the latest studies have found just the opposite. When it comes to prices, especially on key goods, the tariff burden has so far fallen on American businesses and consumers rather than on foreign companies. Consequently, the Yale Budget Lab has found that price level increases from tariffs represent a loss of $1,700 for the average household, while the Tax Policy Center estimates the loss at $1,200. President Trump probably lost some credibility when he declared in his State of the Union that “prices are plummeting downward,” since so many other indicators show the opposite.

That’s the economic picture 13 months into Trump’s second term. Now let’s add the shock and unpredictability of a major Middle East war to the mix. With the Iran conflict disrupting global oil and gas flows, the range of possible economic outcomes widens dramatically. Forecasting either markets or wars is notoriously difficult, so the next six months could test the system in unpredictable ways. Keep your seat belt fastened.

Steven Hill was policy director for the Center for Humane Technology, co-founder of FairVote, and political reform director at New America. See more of his writing at his Substack newsletter DemocracySOS.