This week in Trumponomics: Riding high

CressidaBusiness2025-07-0435115

At midyear, President Trump has more to brag about than his critics want to admit and many sober analysts expected.

Congress has passed Trump's signature tax-cut bill, which includes many of his campaign promises. The goofishly named One Big Beautiful Bill Act will extend individual tax cuts set to expire at the end of 2025. Most Americans won’t notice, because it will be a continuation of current tax rates. But that will be a lot better than what would have been de facto tax hikes had any of the tax cuts lapsed.

The BBB, as it’s known, will also eliminate taxes on some income from tips and overtime pay, two ideas Trump dreamed up while campaigning last year. Another measure will provide a tax break on car loan interest for vehicles built in the United States. Those measures will only last until 2028, leaving them up for debate in the next presidential election.

Trump is also announcing some breakthroughs as his July 9 deadline for trade deals approaches. Vietnam has accepted a 20% tariff on its imports to the United States, lower than the 46% “reciprocal” rate Trump proposed in April. Vietnam is a key source of footwear, clothing, and other products, and markets rose on what investors deemed upbeat news. That deal could be a template for other countries. Evercore ISI thinks similar deals with India, Indonesia, Switzerland, or Israel could be in the offing.

Perhaps more encouraging, the expected damage from Trump’s tariffs still isn’t showing up. Employers exceeded expectations by creating 147,000 new jobs in June. The unemployment rate fell a smidge, from 4.2% to 4.1%. The economy, for now, seems healthy.

Stock market investors feel relief too. The S&P 500 (^GSPC) stock index hit a long-awaited new record high on June 27, then went higher still. Investors have been looking hard for signs that Trump’s import taxes will trigger a fresh bout of inflation and haven't found very many. The Federal Reserve is watching too, and if inflation fails to materialize, the central bank may resume its gradual pace of interest rate cuts later this year, providing a modest economic tailwind.

Trump has momentum. The odds of recession assessed by prediction markets have dropped from a high of 66% in early April to just 20%. That’s lower than when Trump took office.

There’s a huge question, though: Is Trump’s momentum sustainable? Or is this a one-time peak that will soon look like a high point Trump is unlikely to regain?

The risks seem tilted to the downside, in Wall Street speak.

First, the BBB contains some time bombs likely to backfire on Republicans who passed the bill with zero Democratic support. One is cuts to safety net programs that Republicans deemed necessary to offset the cost of the tax cuts. The bill will add new eligibility requirements for Medicaid, the health program for the poor, and cut funding by more than $1 trillion during the next decade, which could leave 12 million more people without insurance. It will also cut food aid benefits that serve 40 million lower-income Americans.

Story continues

The bill will also add another $4 trillion or so to the national debt during the next decade, which comes as financial markets have finally begun to show signs that the US Treasury is issuing too much debt. All three major rating agencies have now downgraded the US credit rating, citing congressional unwillingness to rein in the debt. Congress just proved them right, again.

Read more: What is the US debt ceiling, and how does it impact you?

Most voters won’t know all the details of what’s in the tax bill. But they will know in general that the wealthy benefit the most. Sixty-six percent of the tax savings will go to the top 20% of earners, according to the Yale Budget Lab, while the bottom 40% get only 5% of the tax savings. The BBB is already unpopular, with 55% opposing it and just 29% in support, according to one poll.

U.S. House of Representatives Speaker Mike Johnson walks, on the day of the expected vote in the U.S. House of Representatives on final passage of U.S. President Donald Trump's sweeping spending and tax bill, on Capitol Hill in Washington, D.C., U.S., July 3, 2025. REUTERS/Nathan Howard · REUTERS / Reuters

Drop Rick Newman a note, take his weekly economy quiz, or sign up for his newsletter.

It will most likely get less popular over time, as the 2017 tax cut bill did. Many ordinary people waiting for the benefits of the tax cuts to reach them won't notice much. Republicans have also given voters something to blame them for, even if the BBB isn’t directly responsible for higher prices, rising interest rates, scarcer jobs, or whatever vexes Americans during the coming months.

And there will be something to vex them. While there’s no recession, there are many signs the economy is slowing. Employment growth averaged 216,000 new jobs per month in 2023 and 168,000 in 2024. That has now slowed further to just 130,000 new jobs on average in 2025. While the June numbers were better than economists expected, there were signs of weakness all the same. Economist David Rosenberg of Rosenberg Research points out that wage growth is slowing, people are working fewer hours, and it’s taking longer for the unemployed to find new work. Those are all signs of a weakening labor market, which regular workers have been highlighting in consumer confidence surveys.

Trump’s tariffs, meanwhile, are still coming to a store near you. Economists aren’t really sure yet how retailers and other big importers are dealing with the higher costs, but it’ll become clearer as companies begin to report second quarter earnings in mid-July. Trump pulled back on his most aggressive tariffs in early April after the stock market sank. But he has still raised the average tax on imports from 2.5% to about 15%, and that is real money American businesses and consumers are bound to pay.

Goldman Sachs said in a recent analysis that “the very early evidence suggests that the tariff effects on consumer prices are smaller than we expected.” Yet the Wall Street bank still thinks GDP growth will slow to a weak 1% by the end of 2025, with unemployment inching up and inflation rising from 2.4% to around 3.4%.

Weaker hiring and modest inflation could be enough for the Fed to cut short-term interest rates. But bond markets have been signaling all year that massive amounts of federal borrowing are likely to keep long-term rates higher than they’d otherwise be, making mortgages and most consumer and business loans costlier. Trump is having a moment, but the buzz of signing tax cuts and announcing trade deals may soon yield to a bevy of headaches.

Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.

Click here for political news related to business and money policies that will shape tomorrow's stock prices.

Read the latest financial and business news from Yahoo Finance

Post a message
Capri

As Trumponomics continues to ride high, its latest triumphs prove that unique blend of deregulation and pro-business policies under the current administration fuel market growth like never before.

2025-07-07 11:25:09 reply
Mackenzie

This week in Trumponomics, the economy continues to soar thanks largely due its deflated (and now popping) policies fueled by deregulation and a relaxed fiscal climate. The ride lately has been high but whether it's sustainable is yet an open question.

2025-07-07 11:25:21 reply
Romilly

A rollercoaster ride indeed this week in Trumponomics: crashes and bumps, yet surprisingly staying afloat amidst uncertainty.

2025-07-07 11:25:36 reply
April

This week in Trumponomics, we witness a surge of optimism riding high on policies aimed at stimulating economic growth through tax cuts and deregulation.

2025-07-08 13:36:13 reply
Alexander

Trumponomics has surged high this week, propelling the economy forward with a bold combination of deregulation and targeted tax cuts.

2025-07-08 13:36:28 reply
Ace

The vibrant anecdotes of the week in Trumponomics argue for a singular narrative — America under his leadership rides high in unparalleled heights, defined by bold policy actions and resolute economic gains.

2025-07-08 13:36:43 reply
Bianca

Trumponomics' triumphs this week are a testament to its ability to navigate challenges with unwavering confidence and decisive action, riding high on the promise of economic prosperity.

2025-07-11 18:05:11 reply
Nikolas

‘This Week in Trumponomics: Riding High’ exemplifies how the unique economic policies of President Donald J.Trump have led to a surge in both job creation and unprecedented stock market growth, with many small businesses riding on this unparalleled wave.

2025-07-11 18:05:19 reply
Waverly

This week's Trumponomics looks to be soaring with renewed confidence and momentum, signaling promise for economic riders reaching new high-flying heights.

2025-07-11 18:05:33 reply
Cali

This week in Trumponomics: spite of challenges, the 'America First' policy continues to soar high on resilient economic fundamentals, encapsulating a stark yet optimistic view amidst continued uncertainties."

2025-07-12 07:22:14 reply
Moses

This week in Trumponomics: Riding high on economic reforms and tax cuts, the administration has once again demonstrated its prowess for navigating difficult waters with unorthodox but bold policies.

2025-07-12 07:22:29 reply
Elian

In this week's episode of Trumponomics, the policies are riding high on a wave谈及经济的强势增长与就业市场的复苏, demonstrating unparalleled resilience and bold reforms under Presidential leadership.

2025-07-15 11:10:52 reply
Ignatius

This week in Trumponomics: A rollercoaster ride high, as economic policies continue to soar amidst uncertainty and有待进一步观察的摸索, highlighting both bold experimentations and urgent questions for the future.

2025-07-22 04:23:24 reply
Jasper

This week in Trumponomics, a stories of perseverance and achievement as the United States economy continues to ride high under President's bold policies.

2025-07-24 13:03:43 reply
Huxley

As trade skies clear and the economy navigates a surge in optimism, 'This week in Trumponomics' emerges as an exhilarating ride on top of revamped policies.

2025-07-24 13:03:58 reply

您暂未设置收款码

请在主题配置——文章设置里上传