The US economy continues to surprise the world even under the Trump administration.
In 2025, while most major advanced economies struggled – with growth around 1% or even stagnant, as in the case of Germany – the United States posted a respectable +2.1% GDP growth. Stock markets kept breaking record after record, confirming a vitality that seems almost inexhaustible.
Yet, writes The Economist in a new in-depth report, behind this apparent strength lies a significant cost: the headline calls it the “MAGA tax,” referring to the negative impact of the president’s policies.
The British weekly quantifies both the positive factors that supported growth – from the AI boom to tax cuts – and the brakes imposed by tariffs, mass deportations, and especially constant uncertainty.
The result is an overall estimate of about 0.8 percentage points of lost growth. A balance that highlights both the extraordinary power of the American economic engine and the limits of often impulsive and contradictory choices.
An envied economy
Since Trump returned to the White House in January last year, America has maintained a clear leading position compared to other major economic powers.
In 2025 the gap was evident: while the United Kingdom, France, and Japan grew around 1% and Germany showed substantial stagnation, the United States closed the year with a 2.1% expansion. Stock indices responded enthusiastically, hitting new all-time highs one after another.
All this happened in a context often hostile to growth: mass deportations of migrant workers, chaotic trade wars, and sudden and often contradictory policy announcements.
Many observers who in the months before the inauguration predicted a real economic disaster now find themselves reconsidering their analyses.
Are Trump’s policies really less destructive than feared? Or is the American economy so robust that it can absorb these shocks?
The three major driving factors
To understand how much the economy could have yielded without these obstacles, The Economist’s analysis starts from the three positive elements that nonetheless supported American expansion.
The first and most powerful is undoubtedly the artificial intelligence boom. The four major tech companies alone – Alphabet, Amazon, Meta, and Microsoft – invested over $350 billion in 2025, with projections pointing to about $700 billion in 2026.
This wave of capital triggered a real explosion of spending on data centers, semiconductors, cooling systems, and specialized software. Real investments in information technology and data centers grew by over 15%. In gross terms, this momentum contributed almost a full percentage point to the annualized GDP growth, covering about half of the economy’s overall expansion on its own.
However, a significant share of these investments ends up abroad, especially in Asia regarding hardware and components. After adjusting for import effects, the net contribution shrinks considerably: about $50 billion of additional domestic production, for a final impact of only 0.2 percentage points on growth.
The second boost comes from the wealth effect generated by financial markets. Between Trump’s election and the end of 2025, the S&P 500 rose 15% in real terms, creating about $5 trillion in extra wealth for American households compared to a normal year.
Americans tend to spend only a small portion of these unexpected gains. Applying a conservative multiplier, that is two cents of additional consumption for every dollar of extra wealth, The Economist estimates an increase in overall spending of about $100 billion, equal to a contribution of 0.3 percentage points to GDP growth.
The third positive factor is the pro-growth policies promoted by the administration. Trump facilitated corporate mergers, ordered cuts to federal bureaucracy, and eased constraints on private credit.
The large tax cut package approved in 2025 then injected trillions of stimulus into the economy, making previous tax reductions permanent, restoring full deductibility of research and development expenses, and accelerating depreciation.
According to the average of independent forecasts made by organizations such as the Congressional Budget Office, the Tax Foundation, the Tax Policy Centre, and the Yale Budget Lab, these measures added 0.2 points of growth in 2025 and 0.4 points in 2026.
Summing these three effects – AI, markets, and fiscal policies – the American economy should have grown around 2.7%. The gap with the 2.1% actually recorded represents the first estimate of the MAGA tax: half a percentage point of growth sacrificed.
The direct costs of restrictive policies
The article does not stop at the counterfactual and also measures the brakes directly.
Tariffs have compressed household purchasing power and corporate profit margins, subtracting about 0.2 percentage points of growth according to estimates from the Peterson Institute.
The mass deportations and border closures have made the net migration balance negative for the first time in decades, according to the Brookings Institution’s estimate, reducing both labor supply and domestic consumption demand: another 0.2 points lost.
The most difficult cost to quantify, but probably the most insidious, remains the constant uncertainty generated by erratic policymaking. Tariffs announced, postponed, modified, and then relaunched; immigration agents sent and recalled; sudden conflicts.
The economic policy uncertainty index developed by Scott Baker of Northwestern University has soared by over 100 points. Movements of this magnitude typically push companies to delay investments, with declines between 5 and 10%.
The recession of investments outside AI
Excluding AI-related spending, the investment picture becomes frankly worrying.
In the last four quarters, fixed non-residential investments excluding AI categories contracted by about 3% on an annualized basis, against a +5% average of the previous decade.
Particularly hit are industrial and transportation machinery, while manufacturing construction recorded a real collapse of 20%.
Overall, about $130 billion are missing compared to the historical trend, with a depressive effect on growth estimated at 0.4 percentage points.
This is not a simple reallocation of resources towards AI: the contraction is too large, widespread, and transversal, involving sectors such as oil and gas, automotive, and traditional manufacturing.
Not even the hypothesis of high interest rates crowding out private investments fully holds, since credit for companies remains abundant and relatively affordable. The main cause seems to be political uncertainty.
Adding all these elements – tariffs, lower migration flows, and investment reluctance – the MAGA tax reaches 0.8 percentage points, in line with the initial counterfactual estimate.
Outlook and lessons to learn
The immediate outlook is not particularly reassuring, The Economist emphasizes.
Tariffs remain in continuous evolution, fueling uncertainty among businesses and households. Added to this is the energy shock caused by the war in Iran and the closure of the Strait of Hormuz, which will further compress real incomes and corporate margins.
Yet, despite everything, America continues to show extraordinary vitality. The latest real-time estimates from the Atlanta Fed indicate possible annualized growth of 4% in the current quarter. Without the weight of the MAGA tax, it could approach 5% – an exceptional pace, reached only on a few occasions this century.
On one hand, there remains the discouragement for the concrete damage caused by questionable policies, on the other hand, there is deep admiration for the resilience of the American economic system.
If only the president allowed it to run unburdened, the country could fly again at much higher speeds.
