Trump’s 2026 Pitch: Tariffs and Stimulus

In a prime-time address that blurred the lines between presidential policy and political campaigning, U.S. President Donald Trump laid out his economic agenda for 2026. Facing eroding approval ratings and a slowing labour market, the President sought to reassure the American public that an "economic boom" is imminent, despite conflicting signals from macroeconomic data.

The centrepiece of his announcement was a $1,776 "warrior dividend" for 1.45 million military personnel, timed to coincide with the nation's upcoming 250th anniversary. The payout, totalling approximately $2.6 billion, is reportedly funded by the very tariffs that critics argue have reignited inflationary pressures. "The checks are already on the way," Trump declared, positioning the expenditure as immediate relief for households grappling with the cost of living.

The economic backdrop to Trump’s speech is complex. While the President insisted that he is fixing a "mess" inherited eleven months ago, the data presents a mixed narrative for global markets. Inflation, which had cooled significantly, has reaccelerated following the imposition of import taxes in April. The Consumer Price Index (CPI) is currently tracking at an annual rate of 3%, up from a low of 2.3% earlier in the year.

This uptick in prices challenges the Federal Reserve’s monetary easing path and complicates the narrative of a seamless economic recovery. While stock markets remain buoyant—fuelled by lower gasoline prices and massive capital expenditure in artificial intelligence by tech giants—the real economy is showing signs of strain. The President’s assertion that "we’re the hottest country anywhere in the world" clashes with the daily reality of higher utility and grocery costs, a disconnect that mirrors the struggles of the previous administration to sell positive GDP figures to a sceptical public.

For investors, the most alarming metric cited in recent reports is the cooling of the US labour market. Since the introduction of the new tariff regime in April—a date Trump refers to as "Liberation Day"—monthly job gains have averaged a meagre 17,000. Consequently, the unemployment rate has crept up from 4% in January to 4.6%.

This softening raises critical questions about the resilience of consumer spending heading into 2026. Trump attempted to counter these fears by promising that mortgage rates would fall and teasing "aggressive housing reform plans." However, with the 2026 midterm elections looming, the administration faces a tight deadline to turn promises into tangible relief. The divergence between Wall Street’s optimism and Main Street’s "hard math" remains a key risk factor for equities in the coming quarters.

The speech also highlighted the partisan deadlock likely to define the coming legislative year. Trump deflected blame for rising health insurance premiums onto Democrats and expiring subsidies from the previous era, proposing direct payments to consumers rather than insurers. Yet, with no specific legislative text on the table, healthcare stocks may face increased volatility.

As the US heads into a pivotal election year, the interplay between fiscal stimulus (like the military bonuses), trade protectionism (tariffs), and monetary policy will drive market sentiment. Whether the promised "boom" materialises or stagflation takes root will depend heavily on whether the administration can stimulate manufacturing jobs without further stoking the inflation that is currently eating into real wage growth.