Trump 2.0: tariffs, trade and the state of the US economy one year in

From tariff-funded refunds to tough talk with allies, trade has once again become a central theme of Donald Trump’s White House. One year into Trump's second mandate, economist Gerald Friedman walks RFI through the reality behind the rhetoric and looks to how the administration may ultimately be judged.

One year after Donald Trump returned to the White House, his second administration has wasted little time putting trade at the forefront of policy.

Tariffs, the US president insists, are delivering an economic renaissance. Inflation has supposedly all but vanished. The stock market is booming. Trillions of dollars are said to be pouring into the Treasury, with the promise of tariff-funded cheques soon landing in American letterboxes. Critics, Trump has declared, are "fools".

Strip away the slogans, however, and the picture looks far less flattering.

According to Gerald Friedman, professor of economics at the University of Massachusetts Amherst, Trump’s tariff-driven revival is built on shaky foundations – economically incoherent, politically vindictive and geopolitically destabilising.

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The numbers don’t add up

From an economist’s perspective, Friedman says, Trump’s claims barely survive contact with reality. “Almost nothing” in the president’s upbeat assessment is true. Yes, the stock market is high, but only because a small group of technology giants dominates the indices. Remove them, and the wider market is essentially flat.

The idea that tariffs are generating vast new revenues is equally illusory. Tariffs face an unavoidable contradiction: set them high enough to block imports and they raise little money; set them low enough to generate revenue and they fail to protect domestic industry. Either way, the notion that they are filling federal coffers with “trillions” is "fantasy".

Friedman notes that “virtually no economists outside of those being paid through Donald Trump … support his tariff regime”, particularly given its random and unsystematic application. What is billed as strategic economic policy looks more like improvisation.

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Illusion of tariff-funded cheques

The administration’s proposal to issue tariff-funded “refunds” – between $1,000 and $2,000 per household in early 2026 – has clear populist appeal. Economically, Friedman argues, it makes little sense.

The US already runs a federal deficit of roughly $1.7 trillion a year, around 6 per cent of GDP. Washington does not need tariffs to send out cheques; it can simply borrow more. The real question is whether it should, particularly after extending large tax cuts for the wealthy that continue to inflate the deficit.

There is a deeper irony. Tariffs, Friedman points out, already constitute “the biggest tax increase as a share of GDP that this country has had since the early 1990s”, adding roughly $1,500 a year to household costs through higher prices. Refunding some of that money would merely hand back what had just been taken – while leaving the underlying economic damage untouched.

Inflation, eggs and everyday living

Trump has repeatedly pointed to falling egg prices as proof that inflation is under control. Friedman underlines that egg prices surged because of bird flu, not economic policy, and fell as the outbreak eased. They are down by about half, not by the 85 per cent the president boasts about – “one of the smaller lies”, as Friedman puts it.

Elsewhere, tariffs are doing exactly what economists expect: pushing prices up. Imports such as coffee and bananas cannot realistically be replaced by domestic production. Taxing them feeds directly into the cost of living. Households are paying more, not less.

The impact does not stop at consumer prices. Retaliation and uncertainty are quietly undermining export industries. China has cut back on US soybean imports, hurting farmers. Canada is actively reducing its reliance on the US market, deepening ties with Europe and China.

Even sectors untouched by tariffs are suffering. Higher education – one of America’s largest export earners – is losing foreign students as visas tighten and the country’s tourism has also slumped.

The combined effect, Friedman warns, is “higher prices and a reduction in employment and wages… ultimately, devastating to the US economy”.

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Gunboat diplomacy, with grudges attached

For Friedman, Trump’s economic policy cannot be separated from his personality. Tariffs have become instruments of pressure and punishment, often driven by personal vendettas rather than strategic calculation. Hostility towards Canada’s former prime minister Justin Trudeau, for example, owed as much to personal dislike as to trade policy.

This is where economics merges with geopolitics. The US, Friedman argues, is drifting away from the postwar, rules-based order it once championed towards something far older and harsher – “pre-1940”, rather than merely pre-1945. Trade policy is wielded like a weapon, diplomacy reduced to threat and coercion.

“Nobody wants to be the one who sticks his head up,” to speak out, Friedman says. Corporate leaders and officials see what happens to dissenters and keep their heads down for fear of investigations, legal costs and political retaliation. 

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A symptom of deeper failures

None of this, Friedman stresses, emerged from nowhere. Echoing arguments made by Greek economist and former left-wing finance minister Yanis Varoufakis, he sees Trump as both cause and symptom. Decades of rising inequality, deindustrialisation and attacks on unions hollowed out large parts of the working class, particularly in the US and Europe.

The 2008 financial crisis was explosive. Banks were rescued, executives kept their bonuses, and almost nobody went to jail.

The lesson, Friedman says, was clear: the powerful play by different rules. Regions once loyal to centre-left parties – coal country in West Virginia, manufacturing towns across the Midwest – became some of Trump’s strongest supporters.

Trump did not invent these grievances, but he has channelled them into a politics driven less by repair than by ego and confrontation.

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Judging Trump in 2026

So how should Trump’s second presidency be judged as it heads into 2026? Friedman offers a stark metric. Ignore the rhetoric and watch the behaviour of those with real power. Do Republican lawmakers rediscover a spine? Do corporate leaders decide that long-term stability matters more than short-term fear?

If they do not, the outlook is bleak. “It’s not only the America First agenda,” Friedman says, “it’s Trump’s personal, ego-driven agenda.”

Protests may continue to swell, but without resistance from political and economic elites, the consequences will stretch far beyond the US.

In 2026, the results will be difficult to spin away. Tariffs promise strength and sovereignty. What they are delivering, Friedman argues, is higher prices, weaker alliances and a dangerous slide towards a world the US once helped consign to history.