Economic Growth Masks Widening Inequality One Year Into Trump's Term

2026-01-20 economy

Washington, Tuesday, 20 January 2026.
Despite a booming stock market, the wealth gap has hit historic highs. Data shows US consumers, not foreign nations, are paying 96% of the administration’s aggressive tariffs.

A Divergent Economy: Growth for the Few

As the Trump administration marks its first full year in office today, January 20, 2026, the United States economy is defined by a stark contradiction between headline growth and underlying inequality. On the surface, the metrics appear robust: Gross Domestic Product (GDP) expanded by 4.3% in the third quarter of 2025 [1], and the stock market has surged, climbing nearly 30% since April 2, 2025 [1]. However, these gains have not been broadly distributed. According to Moody’s Analytics, the top 10% of earners now account for approximately half of all consumer spending, the highest proportion recorded since 1989 [1]. This concentration of wealth suggests that the current economic expansion is being driven primarily by asset appreciation among the affluent rather than broad-based wage growth for the working class [1].

The Tariff Bill Comes Due

A central pillar of the administration’s economic strategy has been an aggressive shift toward protectionism, most notably through the implementation of “Liberation Day” import duties on April 1, 2025 [2]. While the White House has maintained that foreign nations bear the cost of these levies, recent data contradicts this claim. A study released by the Kiel Institute for the World Economy on January 12, 2026, analyzed over 25 million shipment records and determined that U.S. importers and consumers are absorbing 96% of the tariff costs, with foreign exporters paying only 4% [6]. Consequently, the U.S. Treasury collected a record $264 billion in tariff revenue in 2025, a figure more than triple the total from 2024 [3]. Economists estimate that these tariffs have added approximately 0.7 percentage points to the inflation rate, keeping consumer prices elevated despite efforts to curb them [5].

Inflationary Pressures and Sector Struggles

The impact of these policies is evident in the daily expenses of American households. While the average price of gasoline has dropped to $2.78 per gallon as of early January 2026 [3], other essential costs have risen. Residential electricity prices increased by 6.7% in December 2025 compared to the previous year [3], and grocery prices saw their largest one-month jump since 2022 in the same month [3]. Overall inflation stood at 2.7% in December, nearly unchanged from the 2.8% rate observed when President Trump took office [5]. Furthermore, the manufacturing sector, which the administration promised to revitalize, has shed jobs for eight consecutive months [3], and the automotive industry alone has lost approximately 28,000 positions over the past year [3].

Housing and Labor Market Uncertainties

Structural challenges are also mounting in the housing and labor markets. The 30-year fixed-rate mortgage averaged 6.11% as of January 16, 2026, contributing to a historic low in housing accessibility; the share of first-time home buyers plummeted to just 21% in November 2025 [5]. Simultaneously, the labor market faces unprecedented demographic headwinds. For the first time in at least 50 years, the U.S. experienced negative net migration in 2025, driven by mass deportations [1]. This contraction has alarmed analysts, who project a net decline of 2 million workers in the coming year, potentially stifling future growth [1]. Compounding this uncertainty is the administration’s conflict with the Federal Reserve; Chair Jerome Powell announced on January 5, 2026, that the central bank faced legal threats for refusing to lower interest rates, raising concerns about the institution’s independence [2].

Sources

US Economy Wealth Inequality