Between the global tariff war and the US Congress’ recently approved One Big Beautiful Bill Act” (OBBBA), which has been renamed the “Big Ugly Bill” by its critics, Trump 2.0 is wreaking havoc on the US domestic economy. In terms of the so-called April 2 “Liberation Day” tariffs, some of which were put on hold till July 9 when many of them, if not all, will come into effect, it is worth noting that nearly 90% of US based small businesses rely on imported goods while more than 20% of its agricultural sector depends on exports. US manufacturers rely on imports for more than 20% of machinery, products and components. More than 41 million US jobs (20% of all jobs) are linked to imports and exports (Business Roundtable). The multiplier indirect effect of direct job losses will be in the tens of millions of additional jobs lost or affected once supply chains are severely distorted.
Trump 2.0 economic policies to-date will also inevitably lead to higher US unemployment and rising inflation. When combined with lower economic growth (the US’ 2025 first quarter GDP growth rate was a negative 0.3% as against the 2-2.5% predicted by the Trump Administration) and stalled investment which is already in evidence given the huge uncertainties and overall poorer economic climate, the US is more than likely to witness stagflation for the first time since the 1970s. While that episode was caused by the unexpected OPEC oil price shock, the forthcoming almost inevitable US stagflation is, sadly, fully predictable, and entirely Trump 2.0 policy induced.
But this is not the full story. Worse is still to come. The OBBBA, renamed the “Big Ugly Bill” by critics because it has regressive tax cuts in favour of the rich and health care and nutrition cuts for the poor was signed into law by President Trump on July 4, as his “Independence Day Bill”. A day earlier, it narrowly passed the US Congress after it had even more narrowly passed the Senate by the deciding vote of Vice-President Vance. Only a few Republican Senators and even fewer Republican Congressmen showed the courage and conscience to vote against it while all Democrats in both houses did so.
The Bill’s measures are anticipated to result in a massive US debt increase of $3.4 trillion over the next 10 years ( the still non-partisan Congressional Budget Office). The broader debt context adds urgency: the US national debt currently stands at $36.2 trillion (Congressional Budget Office) and is still climbing. The recent Moody downgrade of the US’ credit rating is directly linked to the additional federal debt expected because of this legislation. Investors, meanwhile, are reacting with scepticism: the interest rate on a 10- year Treasury note had jumped to 4.3% by July 3, up from the 2.5% rate when Trump 1.0 tax cuts became law in 2017.
The White House insists that economic growth will offset the tax cuts’ cost. The Chair of its Council of Economic Advisers said in May that the economy would grow by 3.2% per annum—-far above the Congressional Budget Office’s 1.9% projection then. The White House also says that tariffs will generate enough revenue to shrink the deficit, but legal experts say recent court rulings cast doubt on his emergency declarations to impose sweeping reciprocal import tariffs.
Indeed, no serious and credible economist appears convinced by the Trump Administration’s figures and analyses. Many regard the plan as “mostly not growth or competitiveness-oriented tax cuts” and warn that high long-term interest rates will harm and even stunt economic growth. The expected positive “trickle down” effects of the tax cuts, even if some materialize, are likely to be small and wholly inadequate to reverse either the current adverse economic trends or the negative economic impacts of the Bill on the US’ most vulnerable population groups.
The Act will lower tax revenues by $4.5 trillion over 10 years, disproportionately benefiting the richest Americans, and cut spending by $ 1.1 trillion, mainly by cutting Medicaid, the health-care program that covers 71 million low-income Americans, including millions of Make America Great Again (MAGA) supporters. The Act is estimated to result in the loss of Medicaid to nearly 12 million people, especially hitting rural America and “red” states such as North Carolina and Arizona which have depended on it. It will; also cut close to $ 200 billion from the Supplemental Nutrition Assistance Program (SNAP) between 2025 and 2034, causing more than 2 million Americans to lose these benefits, with more than 5 million people in households at risk of losing at least some food assistance.
The increased debt will also likely trigger a 2010 law concerning the national debt, the Budget Control Act, which established spending caps and a debt ceiling since it raises the debt ceiling by $5 trillion, surpassing the previous $4 trillion. As a result, even Medicare is at risk of being cut by an estimated $500 billion over the next decade.
The Bill is likely to accentuate the impacts of the economic downturn for already poor, vulnerable and under-privileged American citizens and residents. An estimated 25-40% of Trump’s MAGA base is dependent on federal health care, with the exact percentage depending on which county they live in.
President Trump’s US Independence Day “gift” to US citizens, the OBBBA, seems destined to accelerate the disintegration of American society and, with it, the American Dream.
ABOUT THE AUTHOR
Kamal Malhotra is Distinguished Visiting Professor, NALSAR University of Law, Hyderabad, India; Non-Resident Senior Fellow at the Boston University Global Development Policy Center and has recently also Guest Lectured at the School of Interwoven Arts and Sciences (SIAS), Krea University, India. Prior to his retirement from the United Nations in September 2021, Mr. Malhotra had a rich career of over four decades as a management consultant, in senior positions in international NGOs, as co-founder of a think-tank, FOCUS on the Global South, and in the United Nations (UN) including as its Head in Malaysia, Turkiye and Vietnam (2008-21). He was UNDPs Senior Adviser on Inclusive Globalization, based in New York, USA, for most of the prior decade. Mr. Malhotra is widely published.
