This article is an on-site version of the Free Lunch newsletter. Premium subscribers can sign up here<\/a> to get the newsletter delivered every Thursday and Sunday. Standard subscribers can upgrade to Premium here<\/a>, or explore<\/a> all FT newsletters<\/p>\n<\/div>\n<\/div>\n<\/div>\n Hello Sunday Free Lunchers. <\/p>\n With next week marking a year since the 2024 US election, I thought it would be apt to finally take on one ardent reader\u2019s challenge to \u201cdo a counter-consensus analysis of Donald Trump\u2019s second term\u201d.<\/p>\n I took that to mean outlining a few under-reported economic upsides of the president\u2019s policy programme \u2014 whether by design or otherwise. Coming with a trigger warning, here\u2019s what I found.<\/p>\n First, Trump\u2019s \u201cAmerica First\u201d agenda has compelled leaders around the world to raise spending, enact reforms and pursue new trade deals and relations.<\/p>\n For example, his administration\u2019s threat to retrench funding for Nato has raised European defence spending commitments. This has boosted regional stock markets and manufacturers this year. <\/p>\n The US president\u2019s isolationism \u2014 both on trade and security \u2014 supported the case for the German parliament to loosen its constitutionally enshrined \u201cdebt brake\u201d, enabling a major shift in the EU\u2019s largest economy away from fiscal frugality.<\/p>\n <\/picture><\/a><\/figure>\n<\/div>\n Global policymakers have also set about improving competitiveness. In Canada<\/a>, public support for reducing interprovincial trade barriers jumped as Trump raised tariff threats. Canadian Prime Minister Mark Carney has initiated efforts to liberalise the country\u2019s internal market. In India<\/a>, punitive duties accelerated tax reform. <\/p>\n As the tariff wall around the US has grown, nations and blocs have pursued trade deals with alacrity. For instance, since Trump\u2019s re-election<\/a>, the EU has struck three free trade agreements \u2014 with Mercosur, Mexico and Indonesia \u2014 and is accelerating another with India. On Tuesday, China and Asean signed an enhanced free trade pact. <\/p>\n \u201cThe world has been put on notice that it cannot free ride on US spending and consumers,\u201d says Marko Papic, chief strategist at BCA Research. \u201cNow there is a catalyst to pursue reforms and ease dependence on America, which supports long-term economic growth and stability.\u201d<\/p>\n It is hard to envisage a counterfactual where policy changes would have taken place with the same speed and focus. <\/p>\n Another \u201cupside\u201d is weakness in the US dollar: \u201cA weaker dollar tends to be good for global growth, particularly emerging markets,\u201d says Dominic White, chief economist at Absolute Strategy Research. \u201cIt provides a boost for dollar-borrowers\u2019 balance sheets and the terms of trade.\u201d The administration\u2019s measures \u2014 from protectionism and attacks on the Federal Reserve\u2019s independence, to its weaponisation of uncertainty \u2014 have contributed to the currency\u2019s fall.<\/p>\n Indeed, global economic activity, and trade in particular, has been surprisingly robust this year. Efforts to pre-empt duties have played a part, alongside policy responses to Trump and dollar depreciation. (The watering down of initial \u201creciprocal tariffs\u201d has helped too.)<\/p>\n Second, there are some domestic \u201cupsides\u201d of tariffs that the White House could point to.<\/p>\n Analysis by the Yale Budget Lab<\/a> finds industrial output in \u201ctariff-sensitive industries has risen sharply\u201d this year, based on data to July. (This grouping weights production by import share of output and actual effective tariff rates.)<\/p>\n Martha Gimbel, executive director of the YBL, cautions that this might, in part, reflect a reversion to trend, following a drop in production late last year. But she adds it may also be a response by some US manufacturers to the duties.<\/p>\n \u201cAll the evidence points to tariffs being a net negative for the US economy overall, but there are of course businesses that benefit from protectionism,\u201d says Gimbel. \u201cFor those that produce simple items with relatively few outside inputs, tariffs could already be supporting production.\u201d<\/p>\n Indicatively, a survey<\/a> by consultancy West Monroe in June found over one-third of US companies say they are experiencing positive effects from tariffs.<\/p>\n Tariff revenues have also offset some of the Trump administration\u2019s fiscal loosening. <\/p>\n In the 2025 fiscal year, the US budget deficit declined slightly as customs revenue hit a record high. Over the next decade the Tax Foundation<\/a> expects tariffs to raise $2.3tn, after accounting for their negative economic effects. In August, S&P Global held its credit rating on US government debt citing \u201crobust tariff income\u201d, even as the country\u2019s long-term debt trajectory remains a concern. <\/p>\n Notably, the forthcoming US Supreme Court review on the legality of Trump\u2019s tariffs could put these revenues at risk.<\/p>\n Third, some White House measures are contributing to near-term resilience in the US economy, which was straining before Trump entered office.<\/p>\n \u201cWhile the One Big Beautiful Bill Act has its ugly parts, the full, immediate and permanent expensing provisions for shortlived investment and R&D are the best legislation for businesses\u2019 cost recovery ever signed into law,\u201d says Erica York, vice-president of federal tax policy at the Tax Foundation.<\/p>\n \u201cBy lowering the cost of capital for new investment, they will support onshoring efforts and AI-related investments moving forward,\u201d adds York.<\/p>\n Goldman Sachs reckons various investment incentives in the OBBBA could raise S&P 500 companies\u2019 cash flow by about 5 per cent in 2026, and encourage incremental expenditure on capital and innovation. <\/p>\n The Tax Foundation<\/a> forecasts the legislation\u2019s permanent investment inducements for equipment and machinery to raise long-run US GDP by 0.6 per cent. The broader package is expected to temporarily give the US the third-best capital cost recovery tax system in the OECD, up from 21st, according to the think-tank.<\/p>\n Trump\u2019s tariff threats and global dealmaking has also underpinned a surge in foreign direct investment commitments, particularly in semiconductors. The June 8 edition<\/a> of this newsletter outlined why we ought to be sceptical about investment pledges. Still, actualised real FDI in the second quarter jumped to the highest level since 2022<\/a>.<\/p>\n The administration\u2019s lighter regulatory touch on artificial intelligence, cryptocurrency and the financial sector, despite the risks to stability, has kept markets and pockets of the private sector ticking.<\/p>\n \u201cVibes matter for investors,\u201d adds YBL\u2019s Gimbel. \u201cSignals on deregulation, particularly on technology, will have contributed to exuberance.\u201d<\/p>\n Indeed, recent analysis<\/a> by the Bank for International Settlements highlights how \u201cother factors\u201d have more than offset the negative effects of tariffs on the S&P 500, and underpinned its rally since the president\u2019s April 2 \u201cliberation day\u201d announcement.<\/p>\n The US stock market surge has, in turn, supported spending among richer cohorts, while the less well-off face growing strains. <\/p>\n In sum, several White House measures have propped up economic activity \u2014 particularly by egging on the tech boom \u2014 even if its broader policies undermine it.<\/p>\n Relatedly, it is worth acknowledging the US\u2019s productivity spurt this year. In the first half of 2025, output per hour of labour in the durable goods sector grew by 4.9 per cent on an annualised basis, according to Juan Manuel Correa at BCA Research. That\u2019s the fastest in close to two decades, excluding post-recession recoveries.<\/p>\n This looks set to continue. The Atlanta Fed\u2019s estimate for annual third-quarter real GDP growth is just shy of 4 per cent, and the labour market is cooling.<\/p>\n An analysis by Correa of US industrial production per hours worked shows that productivity gains are concentrated in high-tech hardware sectors, including computers, electrical equipment and aerospace. \u201cThese are part of the broader push to produce compute power, semiconductors and data centres, and aren\u2019t particularly labour intensive,\u201d he says.<\/p>\n The administration contributes to these high-end tech gains through investment incentives, deregulation and tariff carve-outs, adds Correa. (A broader clampdown on illegal and legal immigration also encourages a shift towards more machine-driven and less labour-intensive production.)<\/p>\n So there is a narrow US industrial boom that is likely raising productivity, even if it is not the jobs-rich manufacturing revival Trump pledged.<\/p>\n Between staunch Maga supporters and those unable (or indeed unwilling) to attribute anything positive (however defined) to Trump, this was not an easy exercise.<\/p>\n Are there any upsides I\u2019ve missed? Send yours to freelunch@ft.com<\/a> or on X @tejparikh90<\/a>.<\/p>\n To be clear, my views on the net and long-term economic effects of the Trump administration\u2019s policies remain broadly negative, as I\u2019ve outlined in depth in previous editions. <\/p>\n It is also true that some positives may have happened in Trump\u2019s absence, and that he has had a degree of luck \u2014 for example, with secular trends in technology and falling interest rates. Some benefits are unintended, while others merely offset the impact of negative measures, which may soon dominate.<\/p>\n Still, this was a worthwhile task. Actively seeking out datapoints that run counter to our priors guards against bias and gives a more complete economic picture. <\/p>\n I look forward to more of your challenges.<\/p>\n Do companies deliberately use complexity as a business strategy? This blog<\/a> explains the \u201cconfusopoly\u201d.<\/p>\n Free Lunch on Sunday is edited by Harvey Nriapia<\/em><\/p>\n The AI Shift<\/strong> \u2014 John Burn-Murdoch and Sarah O\u2019Connor dive into how AI is transforming the world of work. Sign up here<\/a><\/p>\n Unhedged<\/strong> \u2014 Robert Armstrong dissects the most important market trends and discusses how Wall Street\u2019s best minds respond to them. Sign up here<\/a><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n\n<\/picture><\/a><\/figure>\n<\/div>\n
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Food for thought<\/span><\/h2>\n
Recommended newsletters for you<\/h3>\n
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