The Economic Impact of Donald Trump’s Presidency

Donald Trump’s Impact on the Economy: An Overview

Donald Trump’s economic policies during his presidency were mainly characterized by tax cuts, trade wars and tariffs, deregulation, and restrictions on immigration.

The Tax Cuts and Jobs Act (TCJA)—one of the best-known aspects of the Trump administration’s economic plan—lowered the tax rates for corporations and individuals, though many of its reforms expire in 2025. Meanwhile, Trump’s tariffs on thousands of products, particularly his trade war with China, have also become a major part of his economic legacy. Trump’s deregulation policies most notably involved rolling back environmental rules, including those governing clean air and water.

Trump and his administration claimed credit for much of the economic success during his presidency, including the booming economy ahead of the pandemic-induced shutdowns and recession. However, critics have pointed out that much of the economic progress he points to was inherited from the administration of former president Barack Obama.

Unemployment, job growth, and gross domestic product growth (GDP) all saw progress in the wake of the Great Recession under Obama’s leadership. Those aspects of the economy continued to grow when Trump took office until early 2020.

Economic Achievements During Donald Trump’s Presidency

Under Trump’s presidency, the economy strengthened and the unemployment rate fell leading up to the pandemic in 2020. The Tax Cuts and Jobs Act (TCJA)—a major overhaul of the tax code—had some positive impacts in its early years, such as increasing consumer spending. The stock market also hit new records leading up to the pandemic and shutdowns eased.

A Stronger Economy

Before the COVID-19 pandemic, the economy under Trump remained strong, with low inflation and job growth. However, many academics have pointed out that this was the continuation of the post-Great Recession economic expansion seen under the Obama administration so Trump inherited the strong economy from his predecessor.

Job Creation

By the end of Obama’s presidency, the U.S. economy had seen 76 consecutive months of job growth, and that streak continued into Trump’s presidency. In 2019, the unemployment rate fell to its lowest level in 50 years, 3.5%. The low unemployment rate persisted until February 2020, when the pandemic hit. Wage growth also increased in 2018 and 2019.

Tax Cuts

The Tax Cuts and Jobs Act, which took effect in 2018 after Trump signed it into law, was the largest overhaul of the tax code in 30 years. The law introduced a corporate rate of 21% and tax treatment that benefited pass-through companies.

While many of the reforms expire in 2025, the TCJA affected income tax rates, standard deduction, personal exemption, health coverage mandate, tax credits and more for individual taxpayers. Studies show the legislation likely boosted economic growth through raising U.S. capital investment, and raised spending as individuals had more after-tax income to spend in the first couple of years the law went into effect.

A Soaring Stock Market

The stock market broke record after record between when Obama started his term and the pandemic in 2020. While market indices like the S&P 500 took a nosedive during the early months of the pandemic, they recovered and entered a bull market that lasted until 2022. The Dow Jones Industrial Average (DJIA) traded at 30,000 in 2020 and jumped 57% overall during Trump’s term.

Challenges and Controversies in the Economy During Donald Trump’s Presidency

Donald Trump faced many challenges and controversies during his presidency, including in the economic realm.

The Impact of the COVID-19 Pandemic

The COVID-19 pandemic led to a global recession, and some of its effects are still felt years later. Initially, real gross domestic product fell 9% below its level at the start of the recession. Employment fell by 1.4 million jobs in March 2020 and 20.5 million in April 2020. In the following months, employment recovered gradually, rising every month that year except for December 2020.

Annual Deficit

Pursuing the aforementioned tax cuts—as well as increasing defense spending—pushed the deficit up during Trump’s presidency. The 2018 fiscal year experienced a deficit of $779 billion, which jumped to $984 billion in 2019, and more than $1 trillion in 2020.

Trade Wars and Tariffs

Trump’s trade policies included implementing tariffs on trading partners like Canada, China, Mexico, and the European Union. The administration said tariffs would benefit American workers, give the U.S. leverage for future trade agreements, and protect national security. However, research from the Brookings Institution shows this did not end up being the case. In fact, research published in early 2024 shows that tariffs put on various goods from China did not increase or decrease the number of jobs in industries they aimed to, but also led to tariffs from other countries as retaliation, which negatively impacted American workers.

A Comparison of the Trump Economy With Previous Administrations

Trump ran a large national deficit during his presidency—but he wasn’t alone. Barack Obama, George W. Bush, and Trump are the presidents with the largest budget deficits. The national debt increased by 33.1% under Trump, 64.4% under Obama, 72.6% under George W. Bush, and 28.6% under Bill Clinton.

When comparing presidencies, we often look at the impact on the stock market—even though presidents tend to have an indirect impact on the economy and the stock market. The S&P 500 is an index often used to measure the performance of the U.S. stock market overall, and presidents often take credit for or get blamed for how it does under their leadership. The S&P 500 jumped 69.6% during Trump’s administration.

The index also increased 84.5% during Obama’s first term and 52.9% during his second. For George W. Bush’s first term, it fell 12.5%, and fell another 31.5% during his second. During Clinton’s first term, it increased 79.2% and 72.9% during his second.

Unemployment and job growth are key indicators for comparing the economy under different presidents. The average unemployment rate under Trump was 5.04%. That’s compared to 7.41% under Obama, 5.31% under Bush, and 5.17% under Clinton. While Trump was the first modern president to leave office with fewer jobs than when he started, Obama saw 8.6% growth in jobs during his presidency. George W. Bush saw 1%, and Clinton, 20.9%.

The Bottom Line 

While a president certainly impacts the economy through legislation and policy, it’s important to remember that no single president can take full credit or blame for the overall state of the economy. Many factors go into an economy’s performance, including actions from the Federal Reserve, major events like war or a pandemic, and more.

Still, reviewing the country’s economic performance during a U.S. president’s term is common. Under Trump, the economy continued the strength it exuded under the Obama administration until the 2020 pandemic when the unemployment rate skyrocketed and the stock market plunged. Much of his legacy is tied up in the response to COVID-19.

Another main aspect of his legacy will be the Tax Cuts and Job Acts (TCJA), and the implication of those tax breaks for corporations and individuals will continue to be studied after many of the reforms expire in 2025. Trump’s impact on the U.S. trade policy will also continue to be reviewed by experts years into the future, as some say that Trump’s trade war with China undid much of the regulations his predecessors had put into place.

The economy under Trump will be under a microscope throughout 2024 as the former president campaigns for a second term, especially as he echoes some of the promises from his initial campaign ahead of the 2016 election.