Trump’s Risky Economic Bets: Can the US Economy Keep Absorbing Shocks?

Donald Trump’s presidency continues to be defined by economic gambles, and, so far, a remarkable ability to avoid significant repercussions. The latest test comes with escalating tensions in Iran, a crisis that directly threatens a key political barometer for the President: gasoline prices. This situation adds another layer to a pattern of disruptive policies that have, surprisingly, not derailed the U.S. Economy, despite raising concerns among economists and observers.

A Pattern of Risk-Taking

Trump’s second term has been marked by a willingness to embrace economic risks. From sweeping global tariffs that increased business costs to restrictive immigration policies and pressure on the Federal Reserve to lower interest rates, the administration has consistently pursued unconventional strategies. Now, the direct military engagement with Iran presents a particularly acute economic risk, potentially lasting weeks or longer. As Politico notes, This represents a continuation of a pattern where Trump “lives dangerously” and largely avoids immediate economic fallout.

Energy Markets and the Iranian Conflict

The immediate impact of the conflict has been a rise in oil prices, though not to the most pessimistic levels predicted. Financial markets are unsettled by the prospect of higher energy costs and increased federal debt stemming from the U.S.-Israel conflict with Iran. This episode joins a growing list of instances where Trump’s policies have tested the resilience of the American economy. The United States now faces another acute economic risk – an attack that Trump has indicated could last four weeks or more.

Resilience Despite Disruption

Despite the disruptive nature of these policies, the U.S. Economy has largely absorbed the shocks. Key indicators – overall growth, the labor market, the stock market and even inflation – remain relatively stable. A significant factor contributing to this resilience has been the substantial investment associated with the development of artificial intelligence, which has helped maintain a solid economic pace. However, the economy’s strength is as well rooted in its fundamental structure as a consumer-driven superpower, proving remarkably difficult to significantly gradual down.

The Role of Investment and Consumer Spending

Jared Bernstein, formerly the chief economist for President Joe Biden, suggests that the narrative of AI investment being solely responsible for the economic strength is an oversimplification. “Investments of business are, what, 12–13% of the GDP? [The U.S. Has] a rate of unemployment of 4.3%. [There are] real wages growing. That, by itself, helps to stimulate consumer spending,” Bernstein stated. The President’s own policies, particularly the Republican-led tax cuts, are expected to provide a substantial boost to economic expansion this year through increased individual refunds and immediate deductions for company investments. The administration’s deregulation efforts have repeatedly pushed stock markets to new highs, contributing to increased household wealth.

Offsetting Economic Shocks

Interestingly, some of the political chaos surrounding the Trump administration may be partially self-canceling. Just last week, the Supreme Court struck down a portion of Trump’s tariffs, effectively lowering the overall tariff rate, particularly for some Asian countries like China. This development could contribute to lower inflation, even as higher oil prices exert upward pressure. Torsten Slok, chief economist at Apollo Global Management, points out the difficulty in isolating the impact of these various shocks, both in terms of magnitude and duration.

Trump’s Balancing Act

Trump has demonstrated a willingness to respond to the demands of the American corporate world and financial markets, although simultaneously disregarding them more often than during his first term. The full extent of the risks associated with the Iranian crisis remains unclear, but potential dynamics could create serious problems, particularly beyond U.S. Borders. Krishna Guha, vice chairman at Evercore ISI, warns that a “wounded, furious, but intact Iranian regime” could continue attacks on energy infrastructure in the Gulf as a means of exerting pressure, leading to sustained higher oil and gas prices.

A Teflon Economy?

Even a sustained increase in oil prices – which has already surpassed $80 per barrel since the conflict began – is unlikely to significantly impact economic growth, according to Guha. This suggests the economy may be able to weather this particular storm without major disruption. However, this doesn’t negate the damage caused by some of Trump’s policies or imply that everything is perfect. Many businesses, particularly small ones, are feeling the pressure of higher import costs. A larger percentage of household debt was seriously delinquent in the fourth quarter of 2025 compared to the previous year, highlighting financial accessibility concerns.

Future Risks: AI and Energy

Looking ahead, the economy’s resilience may be tested by new challenges. Risks associated with artificial intelligence loom large, with potential for sharp market declines if the technology fails to meet productivity expectations or leads to job displacement. A significant disruption to energy infrastructure in the Middle East, pushing oil prices above $100 per barrel, could undermine the relatively moderate inflation levels observed in recent years. Trump has publicly stated his aim is “unconditional surrender” by Iran, a position that could prolong instability and economic uncertainty.

Public Opinion and Political Implications

Despite the economic resilience, Trump’s approval ratings remain low. A recent Reuters/Ipsos poll shows only 35% of Americans approve of his handling of the economy, and just 29% approve of his approach to inflation. This is a concerning sign for the President and the Republican Party, particularly if the current stability were to deteriorate due to his decisions or other factors.

What’s Next: Monitoring Key Indicators

The coming months will be crucial for assessing the long-term impact of the Iranian crisis and Trump’s economic policies. Key indicators to watch include oil prices, inflation rates, consumer spending, and business investment. The Federal Reserve’s response to these developments will also be critical. The administration’s willingness to adjust its policies based on economic realities will be a key determinant of whether the U.S. Economy can continue to defy expectations and maintain its current trajectory.