Nine months into President Trump's second term, the mainstream media is calling it a sinking ship. They cherry-pick data to claim a burn notice has already been issued for his legacy.
Additionally, they choose to forget that President Trump is the "Comeback Kid."
We saw the movie before and need to be reminded of it.
Inflation is an issue that helped Trump win new voters. Inflation has come down by more than 67% from its high of 9.1% in June 2022 for "all items."
For the less volatile "all items less food and energy" category, inflation came down by more than 54.5% from 6.6% in September 2022.
Food inflation went down by almost 73% from its high in August 2022, shelter inflation also went down by 56% from its high in Mar ’22.
(For additional significant consumer pricing level details, please go here.)
Even if we ignore that at the start of Trump's second term, we were still inhaling fumes left behind by Biden, the highest inflation number for any – yes, any – category under Trump 2.0 is at least 33.8% lower than that the maximum comparable under Biden.
The verdict is clear – President Trump is winning the fight against inflation.
Instead, the narrative has changed to affordability, and not inflation.
From the BLS data, prices increased by 21.5% for all items under Biden, or 20.1% for all items excluding food and energy, almost 24% for food and 33% for energy.
Unless we have prices go down considerably – a severely debilitating outcome for any economy – consumers will continue to fill the pain.
Affordability is a "feeling" issue, and history always weighs against an incumbent when he must defend himself on that basis.
President Trump needs to move the discussion away from "affordability," as he's doing already; he can point to gasoline prices (inflation down 89% compared to last year of Biden), new vehicles (inflation down 220%) and energy (inflation down 443%).
That said, there are red flags.
Food inflation is up 38% in the most reading when compared to Biden’s final year's average, food at home inflation up 114.6%, medical care Services inflation up 30%.
Shelter inflation went down by around 30%, but I suspect there are a lot of regional differences. Latest trend is affecting the low-income population the most.
A typical low-income household in the U.S. effectively spends all their earnings on these. People are feeling the pinch and asking questions.
The economy, overall, is doing quite well and much of it is thanks to President Trump’s championing of Artificial Intelligence (AI) and adjacent sectors.
The "Magnificent Seven" - companies heavily involved in AI related areas - is dragging the broad market to newer highs.
Ernst & Young estimates that AI related net contribution to US GDP growth is 0.4% in 2025. IMF estimates "AI-producing" sectors comprise 3.5% of US GDP in 2023; likely the figure is much higher today.
Capital expenditure on AI infrastructure is expected to be over USD 320 Billion in 2025, and trillions more committed later.
Paradigm shift that happened in President Trump's second term drove all of this.
The problem is it takes time for the benefits to trickle down, and much of the benefits of AI will accrue to people high up on the "tech-stack."
America has seen neighborhoods turn into ghost towns as solidly middle-class manufacturing jobs left for China and Mexico, among others.
This time it may be worse.
It's not difficult to see a future where white collar and adjacent jobs – especially at the lower level – will start to be replaced with AI tools.
People who create and maintain these AI tools will be rewarded, but there will be few needed since AI can do routine maintenance on itself.
That creates a winner-takes-all workplace where winners are assessed based on their AI skills, and mostly that. Unless a job is mostly blue-collar (e.g., plumbing or roofing) few people need to be employed in it. Similarly, some of whom have assets to invest in risky AI ventures will see riches; winners will be fewer but richer.
The challenge will be to move away from an AI-maximalist approach that makes the doomsday scenario more likely.
(A related story may be found here.)
President Trump is a master communicator in large and small audiences.
Explaining the fallacies of affordability, and reiterating his winning track record on inflation, requires a "Midas Touch" that he's so famous for.
He needs AI big-wigs to pivot from a maximalist approach to something more narrow, more focused on use-cases where AI will augment what is on offer today. Here too we need the negotiator-in-chief in full huddle mode.
There are still over ten months till the midterms.
Ten months before the 2024 general, Trump was losing by four points to Biden, per Quinnipiac polling but he came back triumphant.
With minor changes, I see no reason why this time will turn out any differently.
All opinions are of the author of this column alone, and do not necessarily represent that of any organization he may be part of. The author alone is responsible for any error or omission.
Partha Chakraborty, Ph.D., CFA is an economist, a statistician, and a financial analyst by training. Currently he is an entrepreneur in Water technologies, Blockchain and Wealth Management in the US and in India. Dr. Chakraborty lives in Southern California. Read Partha Chakraborty's Reports — More Here.
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