United States: A Fast-Growing Economy, but Still No Golden Age

Since taking office just over a year ago, US President Donald Trump has been promising a new golden age for the United States. He repeated that promise this week in Iowa: “We’re beginning what will be known as the greatest years in the history of our country. I believe that too. We are entering a period that will be called the Golden Age of America.”

In the same speech, he described the current situation as follows: “America is back. Our border is secure, our spirit is restored, inflation is stopped, incomes are up, prices are down. Our economy is roaring. Our workers are thriving. And our country is winning again, winning like never before.”

Like so much of what Donald Trump says, this needs to be taken with a grain of salt. Still, we have to acknowledge that part of that statement holds up, especially regarding US economic growth. Despite all the uncertainty of the past year, the US economy is growing at a rapid clip.

To be sure, 2025 got off to a rough start, with real GDP contracting at an annualized rate of 0.6%. This was mostly due to the decline in real consumer spending in January, before the new administration’s policies could take effect. But after that, the economy bounced back, posting successive annualized gains of 3.8% and 4.4% for the second and third quarters. Similar increases had been posted in 2023 and 2024, but the 2025 data was still surprising in a more uncertain environment marked by trade tensions.

And more gains are yet to come. The advance estimate of Q4 2025 GDP won’t be released until February 20, but growth is expected to be robust. Monthly consumer spending data for October and November point to solid quarterly growth despite the effects of the government shutdown. Right now we’re forecasting annualized real GDP growth of 3.8% in the fourth quarter. Other estimates put it above 5%. We also expect a sharp rise in real GDP in early 2026.

Why is growth so robust? Is it because of President Trump’s policies? It’s worth noting that the US economy was already benefiting from several tailwinds before he took office. Average annualized quarterly growth from mid-2022 to the end of 2024 was 2.9%—about 1% higher than what’s considered the US economy’s potential growth rate. The Federal Reserve began loosening its monetary policy in the fall of 2024. The effects of investments in artificial intelligence could already be seen before Trump entered the White House. And stock market performance was robust in 2023 and 2024.

But some factors are closely tied to the administration, including the cornerstone of the President’s economic policy: higher tariffs. The overall effective tariff on imported goods is lower than was initially feared based on President Trump’s announcements, but has still risen sharply: from 2.2% a year ago to 10.9% in October. The economic consequences of this much more protectionist trade policy are still unfolding, but for now the effect on activity remains limited, as expected. In 2025, 68,000 workers lost their jobs, continuing the long-term trend for the manufacturing sector. That said, manufacturing output also regained some momentum last year after two years of decline. But the 1.0% annual gain is nothing remarkable, and one third of that growth came from high tech, a sector where US imports were largely exempt from the new tariffs.

Another key element of the White House’s economic policy in 2025 was its intention to give private investment free rein. President Trump often boasts about his deregulation efforts, but the new regulatory environment remains ambiguous. And regulatory change doesn’t necessarily offer the kind of clarity needed to spur investment. According to the George Washington University Regulatory Studies Center (GW RSC), the current administration has issued a similar number of new regulations (around 30) as previous administrations did in their first year (an average of 37 since Ronald Reagan). Moreover, its method of governance—through executive order rather than legislative change—raises questions about how long these policies will stay in place. Donald Trump has signed 230 executive orders since returning to the Oval Office. That’s more than in his entire first term (graph 1). The GW RSC also reported that in 2025 federal agencies issued 2,441 regulations that were comparable to legislation, while Congress passed only 68 actual laws. And even in industries that saw more deregulation, there was no real revolution. The number of new oil and gas rigs decreased by 7.5% in 2025 and coal-mining production fell by 0.6%.

The White House also views shrinking the government’s size as a stimulus measure that leaves more space for the private sector. In 2025, 274,000 federal jobs were eliminated. But that was partially offset by the 125,000 employees hired at the state and local levels. Nor can it be said that federal spending was significantly reduced despite these net layoffs. In December 2025, total government spending over the preceding 12 months was 1.9% higher than in December 2024. However, once we exclude the big non-discretionary expenditures—debt service, social security, Medicare and Medicaid—the impact of the government’s efforts is much clearer, with spending reduced by 9.0%. Slightly more restricted spending, combined with higher revenues from personal income tax and tariffs, has narrowed the deficit in recent months. The federal shortfall fell to US$1.67 trillion in December, down from more than US$2 trillion at the end of 2024. Whether public finances continue to improve is unclear, in light of the restoration of some spending following the government shutdown and the effects of the tax cuts enacted last summer.

While these factors may have helped boost US economic growth, it’s hard to identify the factors behind its strength. This is especially true given that the biggest surprise in 2025 was the resilience of consumer spending, particularly in the third and fourth quarters. The solid growth in household spending contrasts sharply with consumer confidence, which proved relatively muted last year as consumers remained stymied by the high cost of living. Disposable income also didn’t grow as quickly as real GDP and consumer spending. Consequently, some of the increase in spending came at the expense of savings. In November, the US household savings rate slipped to 3.5%, a low not seen since October 2022—or since 2008, if we exclude the period that started with the pandemic. The wealth effect stemming from the stock market’s strong performance partly explains the resilience of consumer spending. In fact, confidence is markedly higher among households that have substantial stock holdings than among those that don’t (graph 2). But even their confidence waned in 2025. It’s often said that the US has developed a K-shaped economy, where the wealthiest households almost single-handedly drive growth. It’s hard to find definitive evidence of this, and the latest official data from the Bureau of Labor Statistics did not support that hypothesis. But those numbers were for 2024, before Donald Trump was re-elected, and things may have changed since then. Average consumer spending among households in the highest income decile even edged down slightly between 2023 and 2024.

Overall, the data backs President Trump’s claim that the US economy has performed well since his return to the White House. But attributing the stronger-than-expected performance to the policies he’s put in place would be hard to justify, if not premature. It could be explained by the confidence effect, but confidence has barely improved over the past year for both consumers and businesses. Public opinion polls also show dissatisfaction with the administration’s economic policies, especially among respondents who identify as independents. Perhaps the economy’s tailwinds are still blowing strong. Perhaps the United States is experiencing a lasting productivity boost driven by new technologies, just as in the 1990s. But it’s also possible that the foundations of the current growth are weak, raising the risk of a sharp slowdown once the momentum from tax cuts and AI investment begins to ebb.