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According to a of polls by Real Clear Politics, President Trump’s approval rating has fallen to 45% from 52% in mid January and is headed toward the average of his first term. Trump assumed office with the second-lowest approval rating among recent presidents, exceeding only the 2017 low at the start of his first term. Presidential job approval usually fades after an initial wave of post-election enthusiasm, but voter opinions have soured faster than usual during the first 100 days of Trump’s second term. Likewise, a majority of Americans now disapprove of the president’s handling of the job, up from 40% on Inauguration Day. Americans also assign him mixed grades on a range of issues that voters say factored into their decision and his election win. The same survey of polls shows that support for his strict immigration stance has weakened, and most Americans disapprove of his handling of the economy (55%) and inflation (59%).

Unsurprisingly, opinions about President Trump’s job performance differ widely depending on the respondents’ political party affiliation. According to a Pew Research Center , Democrats express far more disapproval of Trump’s job performance (93%) and actions on a range of issues than Republicans approve (75%).

President Trump’s job approval has slipped but remains well above first-term average

President Trump job approval poll average, in %, inauguration day–present

President Trump has governed primarily through executive order during his first 100 days in of-fice, having signed more than any recent president, while signing the fewest bills into law (5) at this point in the presidency. The executive orders signed thus far cover a wide range of policy areas, from immigration to education to energy production to trade. The advantage of executive orders is their speed and force when directing agencies of the federal government to carry out existing statutes. That said, further court challenges could render certain executive orders illegal if they were found to be either contrary to, or overly broad inter-pretations of, existing statutes. To become policy, Congress would have to enact legislation.

Narrow majorities in both the House and Senate, as well as an intense Republican effort to pass a reconciliation bill before the 4 July recess that lifts the debt limit, extends many of the expiring individual income tax provisions in the 2017 Tax Cuts and Jobs Act, and raises spending on defense and border security priorities, may also explain why fewer new laws have been passed compared to during previous new administrations.

Few legislative wins but the most executive orders during frst 100 days of Trump’s second term

Number of laws and executive orders passed during the frst 100 days of a new administration

The effective tariff rate measures the average tariff rate applied across all goods (customs duties divided by imports). The tariffs announced this year have lifted the effective tariff rate to roughly 25% based on 2024 import volumes from just 2.5%. This tariff rate is higher than the 1930s Smoot-Hawley tariffs, yet the average conceals wide geographic variability. North American trading partners escaped the worst outcomes, whereas China’s tariff rate at over 100% is so high that it makes trade virtually uneconomical. In our view, the effective tariff rate will likely settle closer to 15% by year-end, but this is predicated on a substantial rollback in the tariffs on China—an outcome which is hard to forecast given the nature of the conflict.

The Peterson Institute for International Economics  that the economic damage caused by these higher effective tariff rates reduces the potential revenue that would otherwise have been available at lower tariff levels. The highest tariffs in more than a century—and their unpredictability—risk choking off imports and economic activity, which limits the potential revenue that could be used to offset the cost and deficit impact of extending the 2017 tax cuts. Higher tariffs amid a declining US dollar also put upward pressure on inflation, further raising the long-term cost of financing debt.

Latest escalation lifts tariffs to levels eclipsing the 1930s

US effective tariff rate, duties collected as a share of total imports, in %, 1821–present

Roughly 15% of the executive orders announced so far during President Trump’s second term are tied to tariffs, an area where presidents have historically been granted broad authority from Congress. However, President Trump has made heavy use of the International Economic Emergency Powers Act (IEEPA)—a statute that has not previously been used to levy tariffs and is currently facing a growing docket of lawsuits—to justify the tariffs. Even if the courts were to block or enjoin the IEEPA tariffs, the administration could revive them using other statutes, such as Section 232 of the Trade Expansion Act of 1962 or Section 301 of the Trade Act of 1974. 

Trade policy uncertainty will likely remain elevated even as it fades from these extremes. Once the first trade deal is announced, it could set a benchmark that helps guide expectations for other deals. We should expect the administration to reach agreements to lower certain tariffs and businesses to adapt to a new, higher level of tariffs. However, the administration will also announce the results of Section 232 investigations into pharmaceutical and semiconductor trade before year-end and may raise the rhetoric if exporting nations prove inflexible on important trade policy goals.

Unease over the magnitude and breadth of tariff increases highest in decades

US trade policy uncertainty index, 1985–present

Despite the widespread media coverage of government layoffs and spending cuts, federal spending has actually climbed at a slightly faster pace during the first four months of 2025 than it did in 2024. One of the largest components of federal spending—interest payments on Treasury securities—is running at an annualized USD 60 billion higher than this time in 2024. This growth is poised to continue because of the rising debt stock and because newly issued Treasury notes and bonds command a higher interest rate than most of the maturing debt securities they replace.

Whether spending actually declines in future years will depend on the result of ongoing legal battles over how the executive branch executes budgets passed by Congress, as well as the reconciliation bill coursing its way through Congress, where cuts are focused on social programs and certain provisions of the Inflation Reduction Act. The bill also proposes billions in new spending for border security and defense, as well as more limited revenue generation if lower tax rates are extended or even reduced further. Federal deficits as a share of GDP were double 2015 levels at the start of Trump’s second term and will likely rise further without other revenue offsets like tariff revenue.

Federal spending in 2025 exceeds 2024 despite widespread coverage of firings and cuts

Daily US federal government expenditures, in USD trillions, 2024 and 2025 year to date

The number of encounters along the southern border has fallen sharply since President Trump took office in January. Declaring a national emergency along the southern border to justify imposing 25% tariffs on Mexico through IEEPA likely prompted Mexican officials to toughen border security as part of efforts to negotiate exemptions. As a result of these and other actions, we anticipate much lower levels of undocumented immigration. Moreover, President Trump has a desire to boost the pace of deportations, and it seems likely that legal immigration will slow. Since there is a lag between immigrants entering the country and starting to work, we expect the lack of immigrant labor supply will restrain overall job growth beginning in the second half of 2025.

The level of border security funding in the reconciliation package will likely influence the amount of deportations over the balance of President Trump’s term. Whether a fall in net migration creates worker shortages in certain economic sectors will depend in part on the demand for labor in a slowing economy. It will likely be difficult to find replacements for workers who are deported. Tariffs are already poised to place upward pressure on inflation; labor shortages would be a further complicating factor.

Encounters at the sourthern US border have ground to a halt under Trump 2.0

Southwest land border encounters, in thousands of individuals, 2022–present

The University of Michigan’s consumer sentiment index measures Americans’ perceptions of the economy and their own personal financial situation. Since 2006, the survey reports sentiment by political affiliation. Republican and Democratic sentiment often follows US political outcomes, with Americans feeling more confident when their party is in power than when the opposing party is in control and shifting sharply when the White House flips from one party to the other.

Sentiment shifts since the 2024 election have taken a remarkably similar path. Democrats have become much more pessimistic on both growth and inflation under Trump 2.0 and more so than ever before, whereas Republicans are more optimistic than they were under President Biden despite the overall decline in consumer sentiment to levels last seen during the 2022 inflation surge and the 2008 global financial crisis.

Pessimism abounds in other surveys as well. According to the American Association of Individual Investors, only 21.9% of investors believe the S&P 500 will rise in the next six months. Historically, this level of extreme pessimism has been a contrarian indicator. After past readings of this magnitude, the S&P 500 delivered a positive one-year return 90% of the time, with an average gain of 19.7%, since this weekly survey began in 1987.

A worsening mood among Democrats has pulled overall consumer sentiment lower in 2025

Consumer sentiment, overall and separated by political party af˜liation, 2006–present

Tariffs are stagflationary, and policy uncertainty weighs on economic activity. According to surveyed economists, Bloomberg’s median forecast for US GDP growth in 2025 has fallen from 2.1% at the start of the year to 1.4% as of late April. Consumer prices are now projected to rise by 3.2% in 2025, up from an expected 2.5% increase at the start of the year. We believe tariffs and broader policy uncertainty are likely to have a relatively larger impact on the US economy than on most other large global economies. We now expect US economic growth of 1.5% in 2025 versus the more than 2.0% growth we expected earlier this year. We expect growth of 0.7% for the Eurozone in 2025 (around 0.2 ppt weaker than when we entered the year) and below 4% for China (roughly 0.5 ppt weaker).

We believe the Fed will cut interest rates by 75-100 basis points beginning in September when the labor market is likely to show weakness. But in the near term, the Fed’s policy flexibility appears to be more limited, as it has to balance growth concerns against the risk of a resurgence in inflation. This tension in its policy mandate provoked the president to threaten once again to remove Chair Jerome Powell, only to walk it back amid the ensuing financial market volatility.

2025 forecast revisions show higher in˜ation and lower economic activity

Bloomberg median 2025 US GDP and CPI forecasts, in %, September 2024–present

We believe the Trump administration changing its tariff stance in response to equity and bond market turbulence indicates some sensitivity to market stress, which points to the existence of a “Trump put” in some form. With many countries expressing a desire to negotiate with the US on tariff policy, and the Trump administration now somewhat pressured to demonstrate “success,” we expect a variety of deals or sector carveouts to materialize within the 90-day pause period, which could also be extended if needed to provide more time for negotiations. Since Inauguration Day, US stocks have underperformed non-US developed stocks—an unusual development over the past decade—amid increased policy uncertainty and tariffs, highlighting the value of geographic diversification amid this recent episode of elevated volatility.

The S&P 500 has also performed well historically after periods of elevated market volatility. While each case is different, based on data going back to 1990, levels of the VIX above 40 (the index reached a high of 60 in early April) have been followed on average by one-year returns of more than 30% on the S&P 500. We expect the S&P 500 to rise to 5,800 by the end of 2025 as tariff uncertainty eases, the Fed likely cuts interest rates, and investors’ focus shifts toward the prospect of a rebound in US earnings growth in 2026. We believe that phasing-in or capital preservation approaches can allow investors to benefit from medium-term growth while managing near-term timing risks.

US equities lagged ex-US developed markets amid policy uncertainty

MSCI US less MSCI Developed ex-US, 90-day rolling returns in %, 2015–present

The relationship between the US dollar and 10-year Treasury yields suddenly broke down when President Trump announced universal and reciprocal tariffs in early April. The yield on 10-year and 30-year Treasuries rose sharply and the US dollar weakened, stoking concern that foreign investors were shunning US assets. With bond yields relatively high, the yield curve steeper, and economic growth likely to slow, we see an opportunity for investors to switch cash into high-quality bonds and diversified fixed income portfolios to lock in yields, dampen overall portfolio volatility, and provide additional robust income. In our base case, we see the 10-year Treasury yield at 4.0% by year-end and believe it could fall to 2.5% in a hard landing scenario.

After its notable recent selloff, the US dollar may stabilize in the near term, in our view, especially with the Fed sounding caution on rate cuts at the same time as other central banks are cutting rates in response to the deteriorating growth outlook. Gold has been the standout performer year to date. While our year-end forecast stands at USD 3,500/oz, further US political uncertainty could lead to greater demand for perceived “safe havens” and support a move to our upside risk case of USD 3,800/oz.

US dollar and 10-year Treasury note yields part ways

10-year US Treasury yield and trade-weighted US dollar index, 2022–present

Volatility has moderated from its recent peak but is higher than before Inauguration Day

Equity (VIX) and bond (MOVE) market volatility indices, 21 January 2025–present