The US economy is expanding at an annualised rate of 2.2%, according to the latest data, with growth of around 3.2% overall since the end of 2024 when President Donald Trump took office for his second term. This outpaces all other members of the G7 group of leading economies over that period. The International Monetary Fund had downgraded its forecasts when Trump announced sweeping tariffs on imports in April 2025, citing concerns about their negative impact on investment and consumer spending. However, Trump subsequently eased the tariffs considerably. The US economy has also been supported by a boom in artificial intelligence investment by American technology companies, with spending on building data centres reaching $5bn monthly in August 2026, almost double the rate when Trump returned to office.
Inflation remains a concern for American households. The current inflation rate stands at 4.8%, down from a recent peak of 9% under President Biden in 2022 but higher than the 3% rate Trump inherited in January 2025. Economists estimate that US inflation would have been lower without Trump's new tariffs. The impact of the US-Israel war with Iran has also pushed up global energy prices, with diesel reaching a record high of $6.52 per gallon in September. Prices of some grocery staples including beef and coffee have risen since Trump returned to office, though egg prices have fallen. US retailers have warned that rising energy prices caused by the Iran war will increase food production costs and push up till prices.
The median income after adjusting for inflation rose 2.6% in 2025 to $87,460, the highest on record. However, the Institute on Taxation and Economic Policy think tank estimates that the middle fifth of households are around $1,700 worse off in 2026 than they would have been, after accounting for expired government health insurance subsidies and higher-than-expected price rises linked to tariffs and the Iran war. The poorest fifth are estimated to be around $750 worse off, while the richest 1% are estimated to be an average of $12,560 better off, primarily because of Trump's tax cuts.
Job creation has slowed significantly. An average of 34,000 jobs have been added monthly since Trump returned to the White House, compared with 122,000 monthly in the final year of Biden's presidency. Employment in manufacturing stands at 12.6 million in September 2026, slightly lower than when Trump's second term began. The unemployment rate remains relatively low at 4.2%, broadly where it was when Trump took office, partly because his immigration crackdown and deportation programme has reduced the available workforce.
Rising government borrowing poses longer-term risks. The federal deficit reached $2 trillion in the year to September 2026, equivalent to around 6% of GDP, and is projected to rise above 8% of GDP by 2030. The International Monetary Fund has warned that excessive US government borrowing and rapidly rising national debt are raising the risk of a future financial crisis. The cost of government borrowing has risen sharply, with the 10-year US government bond yield now above 5%, the highest since the global financial crisis in 2007. This has pushed up mortgage rates to 7.4% annually for new 30-year mortgages, up from 6.9% when Trump took office, making homes less affordable for new buyers.
For UK savers, borrowers, businesses and investors, a future US financial crisis resulting from high government borrowing and national debt could have deeply damaging consequences, according to the IMF's assessment of the risks.