Republicans face economic fallout from Trump policy failures

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Republicans economic fallout from Trump

Highlights

Since January 2017, manufacturing jobs fell from 8.5% to 8% of total employment and the goods trade deficit nearly doubled, up 55% over the past year despite Trump-era tariffs.
Native-born employment rates declined and foreign-born employment rose from January 2025 to September 2026, with no earnings advantage for native-born Americans under immigration restrictions.
The 2026 budget deficit reached $2tn, the largest outside war or recession, fueling higher borrowing costs and voter concerns amid persistent inflation and doubts about administrative competence.

Policy outcomes and economic record

As reported by the Financial Times, the article argues that the most prominent Trump-era break from traditional Republican economic policy, the trade war, fails to deliver on its main objectives of raising manufacturing employment and shrinking the trade deficit.

Data cited in the piece show manufacturing accounted for 8.5 per cent of employees in January 2017, then fell to 8 per cent in January 2025, where it remains in September, the latest month with available data. The goods trade deficit has also grown rather than narrowed, nearly doubling since January 2017. Although the deficit has narrowed since January 2025 as businesses rushed imports ahead of expected tariff increases, it is still up 55 per cent over the past year.

The article also points to immigration restrictions as another signature policy that does not produce the intended gains for native-born workers. By the author's calculations, employment rates for native-born Americans have fallen since January 2025 while those for foreign-born workers have increased. The same pattern appears in comparisons between September 2026 and September 2025, including among Americans aged 25 to 54, while earnings growth for native-born workers does not outpace that of immigrants.

On fiscal policy, the piece says the 2026 budget deficit reaches $2tn, the largest outside war or recession in U.S. history. It contrasts that outcome with earlier Republican efforts, successful or not, to restrain the structural drivers of deficits, including Social Security and Medicare spending.

Political and market implications for Republicans

The article says those economic outcomes are weighing on Republican political fortunes in an environment of high prices and above-target inflation. It describes Trump's trade war as a political liability, citing exit polls showing that nearly two-thirds of midterm voters believe tariffs hurt the economy.

It adds that while tighter border control is popular, deportation and enforcement efforts are more divisive. Fiscal policy is also described as putting upward pressure on politically sensitive borrowing costs, including mortgage rates, adding to voter concerns about household finances.

The piece further argues that Trump's broader governing approach raises concerns about rule of law, limited government and administrative effectiveness. It cites pressure on the Federal Reserve, equity stakes in private companies including Intel, the limited results of Elon Musk's Doge initiative and Treasury Secretary Scott Bessent's attempts to talk bond yields lower as factors that undermine confidence in the administration's competence.

At the same time, the article distinguishes between policies it views as productive and those it considers damaging. It says Trump's 2017 and 2025 business tax reforms should support productivity by encouraging investment, while his stance on AI, domestic energy production, deregulation and border management align more closely with traditional Republican policy. Its conclusion is that Republicans seeking to retake the White House in 2028 need to separate those conventional measures from the nationalist policies that fail to deliver.

In our earlier article on rising Treasury yields and the nearly $2 trillion 2026 U.S. budget deficit, we explained how higher long-term rates are feeding through to mortgage costs, federal interest expenses, and tighter financing conditions. We also noted that political gridlock after the midterms and competing policy pledges make near-term deficit reduction unlikely, even as total U.S. debt continues to climb.

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