The Feasibility and Implications of 5% U.S. GDP Growth Under Trump's Economic Policies

The question of whether the U.S. economy can achieve 5% GDP growth under Donald Trump's economic policies hinges on a delicate interplay of sector-specific booms, policy-driven headwinds, and the resilience of markets. While Trump's agenda-centered on tariffs, fiscal easing, and industrial revival-has spurred investment in energy, artificial intelligence (AI), and manufacturing, it has also introduced structural risks that could constrain long-term growth. This analysis evaluates the feasibility of 5% GDP growth by dissecting the opportunities and challenges in these key sectors.

Energy: A Shift Toward Fossil Fuels and LNG

Trump's energy policies have prioritized fossil fuels and liquefied natural gas (LNG) exports, withdrawing from international climate agreements and pausing offshore wind projects. This has redirected investment toward traditional energy infrastructure, with tariffs on imported solar panels and wind turbines raising costs for renewable projects. According to a report by the Tax Foundation, such tariffs could reduce long-run GDP by 0.7% when retaliatory measures are factored in. However, the administration's focus on expanding LNG capacity is projected to contribute over $1 trillion to GDP over two decades.

Investors in energy must weigh the short-term gains from fossil fuel infrastructure against the long-term risks of global decarbonization trends. While U.S. energy firms may benefit from Trump's policies, the sector's reliance on volatile commodity prices and regulatory shifts could undermine stability.

AI: A Double-Edged Sword of Innovation and Overinvestment

The AI sector has emerged as a bright spot, with private and foreign investment surging under Trump's "America First" policies. Major commitments include $600 billion from Meta, $500 billion from Softbank and OpenAI, and $500 billion from NVIDIA. The administration's AI Action Plan emphasizes innovation and infrastructure development but lacks robust safeguards against misuse, such as deepfake proliferation or AI-fueled weapons.

However, the Deloitte Insights report warns of a potential overinvestment cycle, where a sharp pullback in AI spending by 2027 could contract business investment and consumer demand. This scenario underscores the sector's vulnerability to speculative bubbles, which could drag on GDP growth if realized.

Manufacturing: Revival Amid Structural Challenges

Trump's policies have spurred significant manufacturing investments, including Ford's $20 billion commitment and TSMC's $100 billion semiconductor facility. The One Big Beautiful Bill Act and revised trade deals are expected to reduce input costs in 2026, offering some stability. Yet, the administration's aggressive tariffs have disrupted global supply chains, particularly in automotive and steel industries.

Clean tech manufacturing, however, has suffered. E2 reports that 51 large projects have been abandoned, costing 29,000 jobs. This divergence highlights the tension between Trump's industrial revival and the long-term competitiveness of U.S. manufacturing in a globalizing economy.

Policy Uncertainty and Long-Term Risks

The feasibility of 5% GDP growth is further complicated by policy uncertainty. Legal challenges to the IEEPA tariffs could force refunds of $100 billion in collected duties and shift to a narrower national security framework. Such volatility complicates long-term planning for businesses and investors. Additionally, the Penn Wharton Budget Model estimates that Trump's tariffs will reduce long-run GDP by 6% and wages by 5%, with middle-income households facing a $22,000 lifetime loss.

Conclusion: A Tenuous Path to 5% Growth

Achieving 5% GDP growth under Trump's policies would require a confluence of favorable conditions: sustained AI-driven productivity gains, a rebound in manufacturing, and a soft landing in energy transitions. However, the drag from tariffs, policy instability, and sector-specific risks-such as AI overinvestment and clean tech stagnation-make this target ambitious. While pro-growth sectors offer opportunities, investors must navigate a landscape where short-term gains often come at the expense of long-term resilience.

The U.S. economy's ability to balance these competing forces will determine whether Trump's vision of robust growth materializes-or remains an aspirational benchmark.