President Donald Trump reacts during a meeting with Canadian Prime Minister Mark Carney (not pictured) in the Oval Office at the White House in Washington, D.C., May 6, 2025. REUTERS/Leah Millis
The U.S. economy now appears to have only a "thin cushion" of protection to bank on, according to Politico, should President Donald Trump's war with Iran begin to have more severe impacts, and the "warning lights" have been evident since before the conflict started.
As Politico laid out in a report from Thursday morning, the typical pillars indicating a strong economy have shown major signs of erosion under Trump, meaning that the "guardrails that protected" the economy from his many "policy jolts" are now "wearing thin."
"New economic reports show inflation is ticking higher, prompting the Federal Reserve on Wednesday to keep interest rates steady," the report explained. "Hiring has stagnated, wage growth has fallen, and market-based interest rates are climbing amid concern over rising prices, sending mortgage rates up. And with oil now topping $100 a barrel — with no end in sight for the Iran conflict — Trump’s economy only has a thin cushion to rely on if the war in the Middle East starts to rock the economy."
Despite persistent spin from the Trump administration that the economy is strong, bad news continues to pile up. On Wednesday, a new report on the Producer Price Index showed that inflation had reached its biggest year-over-year increase in years. Job creation has also gone underwater, with the U.S. losing around 19,000 jobs overall since May. Gregory Daco, chief economist for EY-Parthenon, warned that the economy is dealing with "inherent fragilities."
"Downside risks are rising, and this is an extremely fluid situation," Daco said, noting further that the "typical buffers that would prevent any type of external shock — like an oil price shock — from disproportionately affecting the economy are smaller than usual."
As Politico noted, "the warning lights were flickering" on the economy under Trump even before the war with Iran resulted in a global oil supply chain disruption. The addition of rising gas prices to the situation will only hinder the president's ability to sell his accomplishments ahead of the midterms, with voters signaling that affordability is their number one priority.
“The thing that underlines every strong economy is consistency and progress, and things that promote confidence, and I just don’t see any of those attributes being displayed on a disciplined, routine basis by the White House,” Chuck Coughlin, a veteran Republican strategist at the firm HighGround, told Politico. “Most of the country is looking at the president, going: ‘What is he doing?’”
Andrew Hollenhorst, the chief U.S. economist at Citi, observed that "things look a little bit weaker" for the U.S. economy, even without the impacts of Iran.
"It’s a really unpleasant combination of data and events," Hollenhorst said about the prospect of a bigger oil price shock hitting the economy.
