America’s Golden Age?
Upon his re-election, Trump set out three objectives: an investment boom, a sharp reduction in the trade deficit and a decisive slowdown in inflation. In practice, this proved to be an unresolved trilemma. A commentary by Moreno Bertoldi, and Marco Buti
“America’s golden age begins now,” Donald Trump declared in the inaugural address of his second presidency. The economic data released last week, however, fall well short of validating that prediction.
To be sure, the performance of the US economy in 2025 has been far from negligible.
GDP expanded by 2.2 per cent, unemployment remained low (4.3 per cent in January), inflation was relatively contained at 2.6 per cent, and US equity markets continued their upward trajectory.
Yet there has been no step change of the kind Trump promised — no dramatic break from the “economic disaster” he claimed to have inherited from Joe Biden.
On the contrary, a comparison between 2024 and 2025 points to a deceleration in growth, despite the boom in artificial intelligence investment.
At the same time, the sweeping tariff increases championed by the president have kept inflation above the Federal Reserve’s target without materially reducing the trade deficit, which has remained broadly stable at around $900bn.
It is therefore unsurprising that a growing share of voters expresses dissatisfaction with the administration’s economic management.
Growth continues to benefit primarily the wealthiest segments of the population, while low- and middle-income households face an affordability crisis that in some cases restricts access even to essential goods.
The situation has been aggravated by the costs of tariffs, which empirical studies show have fallen by more than 90 per cent on American consumers and importers.
Upon his re-election, Trump set out three objectives: an investment boom, a sharp reduction in the trade deficit and a decisive slowdown in inflation. In practice, this proved to be an unresolved trilemma.
During the first year of his presidency, economic policy succeeded only in delivering the first goal — and even that may have come at the risk of inflating a speculative bubble in AI.
Tariffs complicated the disinflation process, while the surge in investment — and the associated rise in imports — offset the intended impact on the trade balance. Refusing to acknowledge the existence of this trilemma will only deepen the contradictions of Trump’s economic strategy in 2026.
Against this backdrop comes last Friday’s Supreme Court ruling declaring unconstitutional the use of emergency legislation (the International Emergency Economic Powers Act) to impose generalised tariffs.
Had Trump accepted the judgment, the investment boom might have continued and inflation would likely have moderated further.
The price to pay would have been a larger trade deficit — but in the short term, the United States can afford it.
Instead, driven by an ideological commitment to the intrinsic merits of tariffs, the president is preparing to reintroduce in alternative forms the duties struck down by the court.
How should America’s trading partners — and the European Union in particular — respond to the ruling and to any renewed tariffs? The most prudent course is encapsulated in Napoleon’s maxim: never interrupt your enemy when he is making a mistake.
The Supreme Court’s decision dealt Trump a political blow but also provided him with an opportunity to recalibrate his economic policy.
By doubling down on tariffs, he has instead committed a strategic error that is likely to exacerbate existing contradictions and could carry significant implications for the midterm elections.
Accordingly, rather than reopening negotiations with Washington, the EU should adhere to three guiding principles designed both to safeguard European interests and to allow the Trump administration to persist in its miscalculation.
First, remain open to adjustments of the current agreement but refrain from ratification until it is clear that new tariffs are no higher than existing ones; second, avoid concessions in other areas, notably digital regulation; and third, be prepared to deploy all available response instruments — including the anti-coercion tool — should Trump attempt to leverage the court’s ruling to renegotiate the already inequitable Turnberry arrangement.
Such a strategy will only succeed if member states refrain from the national carve-outs that so severely weakened the Union during last year’s negotiations.
A previous version of this article was published by Il Sole 24 Ore
IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.
