The U.S. economy is in a tougher spot than when President Donald Trump returned to the Oval Office.

The Biden economy had just completed a remarkable sprint.

Annual GDP growth averaged 2.8% in 2023 and 2024. And with unemployment below 4% in the summer of 2023, the economy proceeded to add 174,000 jobs over the next 15 months.

Those are substantially greater than paces economists believe are attainable with the economy at full employment and through indigenous adult population growth and regular legal immigration.

Yet, unemployed office workers—middle managers, administrative personnel and professionals faced escalating challenges in finding new jobs.

President Trump’s return boosted optimism that strong growth could continue through supply-side reforms including deregulation to free up domestic energy production, requiring green industries to compete with legacy technologies without the benefits of preferential government treatment, and tax cuts to encourage historic investments in Artificial Intelligence and legacy industries.

The strong stock market that has followed his reelection has moorings in optimism that AI Agents will boost productivity and corporate profits.

Sadly, investors also assumed the president would use tariffs and deportations surgically to mostly correct imbalances in trade with China and rid cities of criminals among the illegal immigrant population.

The Middle Kingdom is growing more desperate.

For years, China indulged in massive borrowing to finance a property bubble that has burst, and government subsidies and protection for manufacturing.

Now Beijing confronts domestic consumers burdened by lost wealth and reluctant to spend, and excess factory production that it dumps on world markets to exporting unemployment.

Had President Trump only imposed large tariffs on China and sought to persuade allies that trading with China is like purchasing the war bonds that support an invading army, they might have joined us.

On EVs Canada and the EU had already signed on.

Instead, the president’s 360-degree tariff war seeks to reduce what cannot be significantly diminished—the trade deficit.

Thanks to large federal budget deficits, domestic savings can’t fully finance new home construction, business investment and government borrowing. Hence, we must sell Treasuries and other assets abroad to consume more than we produce by importing more than we export.

With China, Russia and other Axis nations investing heavily in arms, we need to increase, not decrease, defense spending by 2% of GDP, and that effectively precludes significantly smaller federal deficits.

Still, neutralizing Chinese mercantilism with tariffs and trading more intensely with friendly nations would rearrange what we make and boost growth.

Rationalizing free trade would refocus the U.S. economy toward more manufacturing aided by robots and more efficient employment in white collar and service activities aided by Agentic AI.

Instead, President Trump’s ever-changing tariffs disrupt supply chains and impose uncertainty that freezes investment decisions.

Mass deportations create labor shortages and limits growth in industries where Americans are disinclined to work—notably, agriculture, construction and manufacturing. It discourages immigration among those with sorely needed skills—newcomers fill about one-fifth of STEM and over two-fifths of doctoral level science and engineering roles.

Overzealous tariff and deportation policies are freezing domestic investment outside of AI where businesses feel compelled to push forward lest they be left by the wayside.

The first half of 2025, Amazon, Microsoft, Google and Meta had capital spending that exceeded growth elsewhere in the entire economy—AI infrastructure is expanding while the capital stock elsewhere is stagnating.

In the first half, GDP growth slowed to 1.6%. Businesses can accomplish that pace and still boost profits by adding Agentic AI to replace white collar and public facing service workers as they leave.

Amazon will soon have more robots than humans at its warehouses.

So, businesses more slowly increase sales, while still increasing profits by lowering headcount.

Artificial Intelligence will likely boost productivity growth by 0.8% to 1.5% a year in a manner similar to the transcontinental railroads, moving assembly line and interstate highway system

Instead of sling shotting the economy into hypergrowth, the AI investment boom barely creates enough private sector stimulus to keep the economy growing at a snail’s pace despite the drag of the president’s excessive, erratic tariffs and deportations.

Private sector jobs creation outside of health care and social services sectors, which are heavily dependent on government funds, was negative May through July.

Unemployed white collar workers’ prospects are worsening as the average duration of joblessness gets longer.

The economy may not be in a recession, but for many mid-career white collar unemployed, it’s a depression—a malaise from which they won’t recover.

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Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.