In his 2025 inaugural address, President Donald Trump said his return to the White House marked the start of a new golden age for the US, especially its economy.
He and his advisers contend that his plans to slap tariffs on imports, deport some immigrants and curtail the arrival of others, cut personal and corporate taxes, and slash regulations would unleash growth, reshore manufacturing, and boost the economy's productive capacity.
The US economy may indeed be undergoing profound change, though it is unclear how much of the transformation stems from Trump's policies and how much from the rapid development of artificial intelligence technologies whose impact on jobs, prices and output remains to be seen.
The picture is somewhat mixed.
GDP TRUDGES ALONG
Gross domestic product measures the total output of goods and services in an economy, and the rate it expands year to year is often cited as a benchmark for economic success.
But there are natural constraints. At a basic level, GDP represents the number of people working multiplied by the average output per worker. All things equal, an aging society with a low natural population increase and a low immigration level -- as in the US right now -- can only grow so fast.
Economists see the underlying US trend growth rate -- the pace at which the economy could expand with full employment and stable, low inflation -- at around 2 percent.
Trump has said his policies could double that pace or do even better, but so far quarter-to-quarter growth doesn't look that much different than it did in prior years.
TRADE REMAINS A DRAG
Some things just haven't turned out as the administration expected. Steep tariffs imposed in the spring of 2025 and expanded since then were, in Trump's view, going to cut US dependence on imports and bring manufacturing jobs back to US shores.
The US Supreme Court has since tossed out some of the levies as unconstitutional, though the administration has plans to replace them with taxes imposed under other regulations. "We have very durable tariff authorities," Treasury Secretary Scott Bessent said last week.
Evidence on how much reshoring is in train has been mixed. Meanwhile, imports have continued to climb in no small part because of demand for components to build data centers to accommodate AI firms.
AN UPSIDE SURPRISE
Yet at the same time, all that imported stuff has helped fuel what has been a big upside surprise. Business investment has boomed from the race to build data centers and establish AI capacity as fast as possible. It has been aided as well by corporate tax changes under Trump's signature One Big Beautiful Bill Act that provide an incentive to invest in capital projects.
The estimates of what's in the AI-sector pipeline are staggering -- several trillion dollars of capital -- but local blowback against data centre projects has also emerged as an important campaign issue.
The local dynamics have made for uncomfortable politics for Republicans, with Trump arguing data centres should be built as fast as possible and criticising opponents, while local candidates face voters genuinely unnerved by the potential impact on their communities -- and their electricity bills.
But for now, business investment has been a major prop to GDP growth that would otherwise seem laggard.
A PRODUCTIVITY BUMP...MAYBE
The potential for the AI boom to usher in an era of profound productivity gains has become a touchpoint of optimism throughout the Trump administration.
Trump has tried rebranding AI as "super intelligence" and taken a direct interest in the industry, which has important security and defense applications, along with carrying immense potential risks.
Bessent has argued that productivity-enhanced growth can fix the country's fiscal problems without the full pain of hefty cutbacks, and Fed Chairman Kevin Warsh has said rising productivity may temper inflation and allow the Fed to lower interest rates.
Yet it's not clear much has happened yet.
There have been some strong recent jumps in labor output per hour, and many economists and business leaders are convinced that the deployment of AI at scale will change much about how companies and people work.
But the data are notoriously volatile and hard to anticipate, and some officials argue that the recent productivity increases are too early to be attributable to the new technology -- as opposed to changes spurred by the demands of the pandemic, like mobile ordering.
Even AI optimists like Warsh have come to acknowledge that the timing and contours of coming economic gains are yet to be determined.
TOO EARLY TO CALL THE REVOLUTION
If some combination of AI and Trump administration policies does reshape the economy's supply side, it could let GDP grow faster with overall less inflation and less concern around slow or negative growth in the labour force.
In economists' terms, it would involve a jump in the economy's potential trend growth rate.
As it stands, organisations like the Congressional Budget Office see a future that looks much the same as the past, with potential growth ebbing alongside the slowdown in population growth rates, and a noninflationary "speed limit" of about 1.8 percent.