Donald Trump's biggest economic problem looks strangely familiar

Donald Trump's biggest economic problem looks strangely familiar

ByMichelle Fleury

It's a disconnect that haunted Joe Biden in 2024, when solid headline data failed to convince many voters that the economy was working for them.

"When I win, I will immediately bring prices down," he said.

Economic growth is holding up, unemployment remains low and the stock market is near record highs.

The causes are different. Biden was grappling with the aftermath of the Covid pandemic. Trump faces higher energy prices linked to the US-Israel conflict with Iran and the fallout from some of his own trade and immigration policies.

The political reality, however, is much the same. Voters are not judging the economy by GDP figures or record highs on the stock market. They are judging it by what they pay at the supermarket, petrol prices and whether they can keep up with the bills.

Numbers only tell part of the story

US economic growth of 2.2% would be respectable by the standards of many wealthy economies. Germany, for example, has struggled to generate comparable momentum. And a stable US unemployment rate of 4.2% hardly suggests an economy in freefall.

Trump argues that he inherited an economic mess from Biden, and points to strong growth, investment and stock market performance as evidence that his policies are working.

Larry Kudlow, a Trump ally and economic commentator, has described the current expansion as "the greatest story never told", external, arguing that "nobody is getting fired".

But voters appear to be reading a different story - one in which Trump won the presidency promising to tackle the cost of living, only for prices to keep rising.

Part of the problem is that wage increases have not kept pace with prices. Average hourly earnings have risen 3% over the last year, while consumer prices have increased 3.7%.

Same language, different meanings

For Democrats, the dynamic feels familiar.

"When economists say inflation comes down, they mean the rate of increase has come down," she says.

"When voters say inflation has come down, they mean the price has returned to what it was. Well, of course, it never returns to what it was."

The Biden administration spent much of 2024 highlighting low unemployment, solid growth and falling inflation. However, many voters remained focused on the higher prices they faced every day.

Lake, who advised Biden's 2020 campaign but was not involved in the 2024 race, says voters judge the economy through personal experience, not economic indicators.

The Trump effect

Biden's critics blamed him for inflation. But he could point to forces largely outside his control, including the pandemic and its supply chain aftershocks.

Some economists argue that today's higher prices are at least partly the result of his own policies, including tariffs, as well as the economic fallout from the US-Israel war with Iran.

"It's his tariffs and the war. People know that. They see it."

A study by the Federal Reserve Bank of New York found the tariffs increased consumer goods prices by about 2.9%.

The impact might have been larger if Trump hadn't later paused some tariffs, struck new trade deals and been blocked by the Supreme Court from using emergency powers to impose many others.

The White House points to tax cuts, job growth and lower prescription drug costs as evidence that the administration is delivering for American families. And it is increasingly embracing policies aimed at easing pressures.

Trump has called for a cap on credit card interest rates and floated the idea of a $5,000 payment to American adults if Republicans retain control of Congress.

The measures reflect a political reality familiar to both parties: when voters are anxious about prices, arguments about solid growth and low unemployment are rarely enough.

If recent political history is any guide, perceptions of the economy may matter more than the economic data itself.