In the immediate aftermath of what the Trump administration termed "Liberation Day," the economic forecasts were starkly divided. President Donald Trump promised an unprecedented boom, while a chorus of economists and trade experts warned of impending recession and runaway inflation. Nearly eight months into a significant global tariff regime, the reality has defied both the most optimistic promises and the direst predictions.
The Divergence Between Prediction and Economic Reality
Following the April tariff rollout, President Trump doubled down on his campaign rhetoric, asserting on April 3 that markets, stocks, and the country were poised to boom. In contrast, voices like BlackRock's Larry Fink suggested the US was likely already in a recession, with JPMorgan Chase warning of a potential global downturn.
The anticipated economic collapse has not materialised, but neither has the promised manufacturing renaissance. Available federal data, though delayed, indicates the US economy has held steady. The probability of a recession in the next year has dropped below 25%. The story is one of surprising resilience, not dramatic transformation or collapse.
Six Key Predictions: A Post-Mortem
The economic narrative can be broken down into six bold predictions made by the White House, economists, and business leaders. Here’s what actually happened.
1. Employment and the Promise of Jobs
Trump's tariffs have not delivered a significant boost to employment. While the US added 119,000 jobs in September—beating expectations—this was an outlier. Job growth had lagged in prior months, and by September, the unemployment rate hit 4.4%, a four-year high.
The manufacturing sector has shed approximately 54,000 jobs since Trump took office. For some, like Arnold Kamler of Kent International, tariffs were directly responsible for job losses. High duties on Chinese bicycle components forced the closure of his South Carolina factory, costing 64 jobs, as assembling bikes in the US became unfeasible.
2. Inflation: A Fear That Fizzled
Both the President and economists largely missed the mark on inflation. While tariffs did lead to swift price hikes from major retailers like Macy's and Best Buy, the worst fears did not come to pass. Inflation has hovered around 3% for months—above the Federal Reserve's 2% target but below many forecasts.
Several factors moderated the impact: tariffs affect a narrow band of goods, while housing and gasoline prices helped keep overall inflation in check. Furthermore, policy uncertainty has caused companies to delay further price changes, waiting to see where tariffs will ultimately settle, especially with a pending Supreme Court case.
3. Trade Revenue: A Partial Win
This is one area where the administration's prediction held true. Tariffs have raised substantial revenue. Treasury data shows customs duties averaged $25 billion monthly between April and September 2025, a massive jump from the $6.6 billion monthly average in 2024.
However, Trump's claim that tariff revenue "could replace the income tax" proved wildly off base. Total duties for fiscal 2025 reached about $195 billion, dwarfed by individual income taxes of $2.4 trillion in 2024. Future collections hinge on the Supreme Court's imminent decision on Trump's authority to impose the tariffs.
4. Economic Growth: The AI Lifeline
Contrary to recession forecasts, GDP grew at a robust 3.8% annualised rate in Q2 2025, with Q3 tracking around 3.5%. A key, unforeseen driver was the AI-investment boom, which Barclays estimates contributed 0.8% to GDP growth in the first half of the year.
This fuelled a stock-market rally, supporting consumer spending. Additionally, Trump's walk-back of many threatened duties—like reducing China tariffs from 145% to 20% by October—softened the blow. The effective tariff rate rise has been less severe than the stated rates due to import substitution.
5. Manufacturing: A Self-Defeating Strategy?
Trump's central promise of a manufacturing revival remains unfulfilled and may be working against itself. US factory activity has contracted for nine consecutive months. Manufacturers cite the ever-shifting tariff landscape as a major barrier to planning and investment.
While the White House highlights investment announcements from companies like Apple and TSMC, these are long-term projects that may have proceeded regardless. The core challenge persists: to truly reshore decades of offshored production, tariffs would need to be prohibitively high, which would simultaneously hurt manufacturers reliant on foreign inputs.
6. Trade Balance: A Volatile Metric
Tariffs have scrambled US trade patterns. The goods deficit ballooned in March as imports surged pre-tariff, then plummeted in April. By September, it shrank to $79 billion, a five-year low, though largely driven by volatile gold trades. Year-to-date, the deficit remains higher than 2024.
Trump frames a shrinking deficit as a victory, but many economists dispute the premise that a deficit is inherently bad. It often reflects strong domestic demand and supplies foreign capital for reinvestment in US assets. As long as tariff policy remains unpredictable, trade volatility will continue.
The Road Ahead: Uncertainty Remains
As 2026 approaches, economists expect continued AI investment and potential tax cuts to support growth. The full effect of current tariffs may not be felt until the latter half of 2026, according to Fed estimates. Chairman Jerome Powell has admitted the difficulty of precise prediction, a sentiment echoed by the past eight months of unexpected economic stability.
The ultimate lesson is one of humility for both politicians and forecasters. The US economy, buffered by an AI windfall and consumer resilience, has navigated the tariff shock in a way few anticipated, leaving the grand promises of revival and the warnings of doom equally unfulfilled.
