"The Golden Age for America Begins Right Now" – that's what Donald Trump promised Americans a year ago after being sworn in as the 47th President of the United States. If we look at the development of the US stock markets since January 20, 2025, we might think he was right, writes the German public media ARD.
During this period, the main Dow Jones index rose by more than 14 percent, the S&P 500 market index – by almost 17 percent, and the technology index Nasdaq 100 – even by more than 21 percent. But do US stock markets really reflect the state of the US economy?
Growth is mainly due to the boom in the field of AI
"If we look at the development on Wall Street, we will see that the indices are mainly driven by large companies in the field of artificial intelligence (AI)," says Stefan Ries, capital market strategist at the asset management company Acatis. This is only one part of the US economy, which, however, has a big impact on the stock market. "The real economy has not yet been greatly affected by this," he adds.
"Trump is incredibly lucky that the technology sector related to artificial intelligence is experiencing such a boom and that the world's leading companies are American," also believes David Kohl, chief economist at the bank Julius Bär. In the third quarter, gross domestic product (GDP) grew by 4.3 percent on an annual basis. The US economy has not grown this strongly since the summer of 2023 - mainly thanks to billions of dollars in investments in data centers.
But it is precisely with regard to artificial intelligence that it is debatable how sustainable the growth of the US economy is and whether it has a positive impact on businesses and employment, says Laura von Daniels of the "Science and Policy" Foundation (SWP). There is a big question mark over the growth, which is mainly due to increasing automation and the use of AI in the labor market, the expert adds.
"Underdeveloped strategy"
Trump claims that with his economic policy of tariffs, deregulation and tax cuts, he aims to protect domestic industry, increase the production of American companies and thus create jobs. "To achieve this, Trump needs investments in his own country", explains von Daniels. In negotiations with trading partners, he has received promises that they will invest in the American market. "However, this does not give any idea of the dimensions of investment activity in the United States in the coming years", the expert believes.
In addition, the overall economic effect is questionable. "We see pressure being exerted on other countries, but so far he has not presented a mature economic or industrial strategy", the analyst from the "Science and Politics" Foundation told ARD.
In any case, Trump's promises have not yet been reflected in the labor market. In November 2025, unemployment in the United States reached 4.6 percent, the highest level in the last four years. The manufacturing industry is performing particularly poorly. In December alone, according to the US Labor Department, 8,000 jobs were cut in this sector. "Trump has not presented any concepts on how he would like to maintain or increase employment in the US", says von Daniels. An example of this is the Taiwanese chip manufacturer TSMC. "They are investing in the US market and want to produce chips there, but due to a lack of sufficiently qualified labor, they are bringing their own experts, their own specialists", she added to ARD.
Trump's approval rating is falling
The main theme of Donald Trump's election campaign was inflation. In fact, one of the reasons why he won the election was that he constantly complained about high prices and blamed it on the Democratic Party of Joe Biden and Kamala Harris. Meanwhile, the picture has turned: inflation has not fallen, and consumer prices in December increased by 2.7 percent, continuing the trend from November. An even bigger problem for Trump, however, is the increasingly expensive cost of living in the United States - housing and food costs.
This is what recently brought the Democrats victories in several states. Trump had promised to lower prices "very, very quickly" and to "make America affordable again". However, prices are about 25% higher than before the pandemic. A number of everyday goods such as eggs, coffee, steaks, orange juice have become symbols of the affordability crisis. Although wages have also increased significantly during this period, people usually feel the price increase more strongly, ARD noted.
According to a Reuters/Ipsos poll, approval of Trump's economic policies among all Americans has fallen to 33 percent, the lowest level since the start of his term. "To me, that's an indication that people feel like Trump is trying to sell them something that's not going to do much," von Daniels said.
Tariffs mean higher prices for consumers
Whether costs for Americans will fall over time is a highly debatable question. More likely, the opposite will happen, as Trump's import tariffs, which are intended to boost U.S. demand and burden foreign exporters, could push prices higher. So far, only about 4% of the tariff burden has been borne by foreign companies, while 96% has been passed on to American buyers, according to a recent study by the Kiel Institute for the World Economy (IfW), cited by ARD.
"Tariffs are an own goal", says Julian Hintz, who heads the institute's research. He is adamant that the claim that foreign countries have borne these tariffs is a myth.
Tariffs make imported goods more expensive as if they were a consumption tax, says SWP expert von Daniels. "Initially, the negative effect of tariffs was somewhat mitigated by two factors: the available stock of goods, which were still being sold at the old, more favorable prices. The second factor is foreign exporters, who, unlike in Trump's first term, are no longer inclined to lower prices and reduce their profits," Laura von Daniels of the SWP explained to ARD.
The national debt may continue to grow
However, Trump managed to achieve two goals with the tariffs: first, the trade deficit shrank to around $30 billion, the lowest it has been since 2009. And second, according to White House data, last year the US had around $200 billion in revenue from tariffs. Trump wants to use them to finance his tax reform - the so-called "Big Beautiful Act".
However, the revenue from the tariffs will only be enough for about half of the costs of the gigantic fiscal program, experts from the British asset management company Insight Investment believe. Despite the cuts to health and social programs, experts expect the debt to grow. The reason is that the savings from the cuts are unlikely to compensate for the reduced revenue due to lower taxes.
In the meantime, the US national debt has exceeded the $38 trillion mark for the first time. "The fact that the US national debt currently amounts to more than 123 percent of gross domestic product remains worrying", says von Daniels on this occasion.
"The"privileged position" of the most important economy and the dollar still attracts investment. Whether this will remain the case in the future, however, will depend on whether Trump continues his attacks on the Federal Reserve as an independent central bank, the SWP expert also told ARD.
Author: Till Bücher (ARD)