“Anything can happen,” President Donald Trump told an interviewer when asked if he thought the U.S economy could enter a recession in the near term. His remark reflected a series of sobering data points, including a Q1 economic contraction, persistent inflation, consumer confidence at a pandemic-era low, and stock market volatility driven by his administration’s ever-changing trade policies.
Even though Trump has sought to shift the blame for the economic malaise on his predecessor, 67% of Americans believe he bears at least some responsibility for the current situation and 46% say he is the only one responsible. Net public approval of the president’s economic performance stands at -15 percentage points, and his overall net approval is down 7 points since April, driven by disillusionment among young voters, Latinos, and independents. A growing majority of U.S. adults, 59%, including 22% of Republicans, say his policies have worsened the domestic economic conditions. Fifty-four percent are skeptical of Trump’s ability to negotiate favorable trade deals with other countries, cutting to the core of his public image as a businessman and dealmaker.
Trump is urging patience on tariffs and restraint on consumption as U.S. manufacturers and retailers brace for a drop-off in Chinese imports and Americans worry about a higher cost of groceries (87%), product shortages (74%), and retirement savings (69%). Sixty-four percent of adults, including 33% of Republicans, believe their cost of living is on the wrong track. For many, inflationary concerns are exacerbated by uncertainty around federal funding for public health, food assistance, and other programs that the Trump administration and conservative Republicans in Congress are aiming to cut significantly in next year’s federal budget. Against this backdrop, public trust in the Republican Party’s ability to manage the economy has declined and voters’ preference for a Democrat to represent them in Congress (a measure known as a generic congressional ballot) has been trending upward.
As details emerge of the administration’s trade deal with the UK and talks with China begin later this week, we are curious to see if the president’s aggressive messaging of these “wins” helps persuade the roughly 20% of Republicans that oppose many of his economic and trade policies and do not identify with the MAGA movement. We are also watching to see if Democrats, whose public image is yet to recoverfrom their 2024 losses, seize the moment to present an alternative vision for the economy — one that resonates with the disaffected and first-time Trump voters, potentially bringing them into the fold.
This month, various U.S. House committees are working to finalize their respective sections of the federal budget package that Republicans hope will produce enough savings (or find new ways to raise funds) to extend President Trump’s 2017 tax cuts and fund his administration’s other priorities. The White House has just made their job considerably harder by releasing an FY2026 budget request that calls for a historic increase in funding for border security and defense (by 65% and 13% from 2025), combined with a 23% reduction in “discretionary” spending on education, infrastructure, climate, and foreign aid. The Environmental Protection Agency and the National Science Foundation would lose more than half of their funding, hampering their ability to conduct climate and clean energy research. A national program to install electric vehicle chargers along major highways, funded by a 2021 infrastructure law, would end (barring a successful legal challenge). Further savings are expected from shifting federal spending on public assistance onto state governments, impacting economically vulnerable voters many of whom backed Trump in 2024.
Typically, a president’s budget request outlines his spending priorities and political goals, then undergoes significant changes as Congress translates it into legislation. During Trump’s first term, Congress largely sidestepped his requests for bold cuts to approve bipartisan budgets that increased both defense and non-defense spending. The level of cuts the president is proposing for 2026 is unprecedented, amplifying tensions between the White House and congressional Republicans as well as among individual lawmakers who disagree on reducing funding for entitlement programs or eliminating clean energy tax breaks (more on that below). Unlike prior years, Republican leaders fully expect to pass their party-line budget package without any Democratic votes, as long as their own ranks remain united — which could be a challenge in the House, where the Republican Party currently holds a five-seat majority. But a strong sense of loyalty to Trump among Republicans in both chambers makes major challenges to his agenda less likely than during his first term. And if such challenges do arise, the administration has indicated it is prepared to use impoundment — a process in which the president could take over Congress’ spending powers — to withhold and redirect funds that lawmakers approve, potentially pushing the issue into uncharted legal waters.
Republicans in Congress are exploring creative ways to tax electric vehicles as the fate of clean technology tax incentives created by the Inflation Reduction Act hangs in the balance. House lawmakers are looking to create two annual fees, $250 for EVs and $100 for hybrids, to boost highway and infrastructure funding and help offset some of the cost of extending President Trump’s tax cuts in next year’s budget package. A $20 fee on gasoline-powered cars was voted down as debates about raising the fuel tax or overhauling the funding mechanism for the Highway Trust Fund continue. The chances of the fees making it into the final budget bill are unclear, but an appetite for taxing EVs is clearly there: A Republican proposal in the Senate aims to impose a one-time tax of $1,000 or more for each EV sold. (Hybrids would not be affected.) If enacted, the fees — which far exceed what drivers of the least fuel-efficient ICE vehicles pay in gasoline taxes — would add to EV registration fees already in place in at least 39 states ranging from bright-red Texas and Arkansas to blue states like California and New Jersey.
The House is also moving closer to eliminating a $7,500 EV consumer tax credit as Republicans argue whether to preserve other IRA clean energy incentives (such as technology-neutral clean electricity tax credits or nuclear power production tax credits) or repeal them altogether ahead of their 2032 expiration date. The tax breaks have increasingly benefitted Republican congressional districts, but a number of conservatives, including members of the House Freedom Caucus, are keen to fulfill Trump’s pledge to end the “green new scam.” The next couple of weeks should give us a better idea of which tax credits could ultimately get cut as parts of the budget legislation move through House committee votes. The complete package is expected to pass in the late summer or early fall — all but ensuring that most other legislative activity will remain at a standstill until then.
