2026 Midterm Elections

The U.S. Economy Under Trump Between Growth and Inflation

ECONOMY

By Marcelo Salamon

10/1/20263 min read

The November 2026 midterm elections take place in a contradictory economic scenario: U.S. GDP grew 2.2% in 2025, but inflation hit 4.2% in May 2026, the highest level since 2023. Two-thirds of American voters say economic conditions and inflation will be decisive for their vote, and only 27% trust Trump's economic management. The president seeks to re-elect Republicans to Congress but faces the wear and tear of high prices and a Judiciary that struck down his global tariff.

Economic Growth: GDP and Employment

The U.S. economy under Trump (2025-2026) showed moderate growth, sustained by resilient consumption and investments in protected sectors.

GDP 2025: 2.2% growth for the year, slowing.
GDP 2026 (Q1): 2.1% at an annualized rate, above the initial 1.6% estimate.
2026 Projection: Expected average growth of 2.5% for the year, according to a Bloomberg .
Labor Market: Remains strong, with unemployment at historically low levels, though job creation slowed in tariff-affected .

Growth was sufficient to avoid recession but insufficient to generate widespread optimism among voters, who feel the impact of inflation in their wallets.

Inflation: The Achilles' Heel

Inflation is the main political liability for Trump in the midterms. After starting 2026 with CPI at 2.4%, prices accelerated due to energy shocks and residual tariff effects.

CPI May 2026: 4.2% over 12 months, the highest increase since April 2023.
PCE May 2026: 4.1% over 12 months, the Fed's preferred indicator.
CPI August 2026: 3.4% over 12 months, stable, but with a monthly acceleration of 0.4%.
Core Inflation (excludes food and energy): 2.4% in August, still above the Fed's 2% target.

Energy and housing prices were the main drivers of inflationary pressure, with gasoline and natural gas posting sharp increases in March and April 2026.

Tariffs: Revenue, Impact, and the Supreme Court Defeat

Trump's tariff policy was the most aggressive since World War II but ran into the Judiciary.

Global Tariffs (April 2025): Surtaxes of 10% or more applied to most trading partners based on the IEEPA.
Revenue: Estimated to have generated more than $175 billion in federal revenue by February 2026, but with costs passed on to importers and consumers.
Supreme Court Decision (02/20/2026): Struck down global tariffs by a 6-3 vote, ruling that the use of the IEEPA exceeded presidential authority without Congressional approval.
Post-Decision Impact: The U.S. government may have to return part of the $175 billion collected, creating fiscal uncertainty.
Tariffs Upheld: Sector-specific measures on steel, aluminum, and fentanyl-related products remain in effect.

Trump responded by announcing a "Plan B" based on Section 301 of the Trade Act of 1974 to maintain pressure on China and other countries, but cannot reimpose the global tariff regime unilaterally.

Monetary Policy: The Fed and Kevin Warsh's Appointment

Monetary policy under Trump underwent a transition in 2026, with Kevin Warsh's appointment as Federal Reserve Chair.

Fed Funds Rate: Remained elevated in early 2026 (above 4%) to combat inflation, but rate cuts are expected in the second half of the year.
Kevin Warsh: Took office in May 2026 with a profile favoring lower rates and less regulation, but his impact is still initial and limited by the Fed's technical mandate.
PCE (Fed's preferred inflation): 3.4% over 12 months through August 2026, above the 2% target.

Warsh represents a paradigm shift, but the Fed maintains operational independence, and his practical effects on the economy are still limited in this first year of management.

Market Results and Electoral Outlook

The market reacted with volatility to the Supreme Court decision, with declines in tariff-protected sectors but relief in import-dependent industries. For the midterms, the scenario is challenging for Republicans:

Economic Approval: Only 27% of voters trust Trump's economic .
Voter Priority: 66% cite economy and inflation as decisive voting .
Midterm History: The president's party tends to lose seats in Congress in midterm elections, especially with high .

Trump's strategy to retain the Republican majority focuses on blaming Democrats for Congressional obstructions and highlighting GDP growth and a strong labor market, but the electorate appears more sensitive to high prices at the grocery store and gas .

References

Suprema Corte dos EUA derruba tarifas globais de Trump. Reuters, G1, O Globo, DW. Fevereiro 2026.
Inflação nos EUA vai a 4,2%, maior patamar desde 2023. Folha de S.Paulo, Trading Economics, Euronews. Maio-Agosto 2026.
PIB dos EUA cresce 2,2% no primeiro ano do governo Trump. O Globo, Exame. Fevereiro-Junho
Análise: Estratégia de Trump para Midterms rejeita o que eleitores querem. CNN Brasil. Setembro