American economic resilience, imperialist aggression and class polarisation have far-reaching implications for socialist perspectives in the US and elsewhere. In this guest piece for the anti-empire notes newsletter, G. Stewart, a New York-based socialist journalist and activist, examines the dynamics of US domestic economic expansion since the pandemic. A second contribution will analyse the US in the world economy in the context of Washington’s imperialist aggression and its rivalry with Beijing. A third instalment will explore the state of the US working class, organised labour and the social movements.
The US economy is undergoing its biggest ever capital investment boom, driven by government industrial policies, corporate tax cuts and AI data centre spending. Profits as a share of the economy are at their highest in 80 years. The stock market routinely smashes records, and the unemployment rate remains near historic lows.
Such economic upswings normally spell political success for a US president. But Donald Trump’s poll numbers are miserable, not only because of outrage over his reactionary policies but also because of working-class frustration about the cost of living and worries about AI-driven job losses. What’s more, the unpopular US war on Iran and its global energy disruption, along with the trade war with China and other countries, have affected the US, driving up inflation. Meanwhile, the gains of the economic expansion have gone overwhelmingly to the wealthy—the richest 10 percent of the population now account for more than half of all consumer spending. The top 0.1 percent hold roughly $22.5 trillion—about 13 percent of total household wealth and around 5.5 times the wealth of the bottom 50 percent combined.
When the boom ends, corporate debt amassed in the murky private credit market—estimated at up to $2 trillion—could worsen any subsequent recession. At the time of writing, however, the US economy is powering ahead. To understand why, it’s helpful to look at the turn towards economic nationalism and economic stimulus initiated in Donald Trump’s first term (2017-21) and embraced by Joe Biden’s administration (2021-25). Whatever their political differences, Trump and Biden reflected an emerging policy consensus that a trade war with China was inevitable and necessary to revive US industry, that Washington should prioritise military might alongside tariffs and that economic stimulus is key to reviving the US economy.
The post-pandemic economy
The excruciatingly slow recovery from the Great Recession (2008-09) enabled Trump to tap working-class discontent as he eked out a victory in the 2016 election. His $5.5 trillion in tax cuts favoured corporations and the wealthy but failed to deliver the promised boost to economic growth. In part, that was because companies used their tax breaks on share buybacks to benefit investors. At the same time, Trump levied tariffs on China, with the promise of rebuilding heavy industry, but the trade war fizzled and manufacturing job losses continued.
On the eve of the pandemic in early 2020, the economy was growing at a respectable 2.3 percent; the unemployment rate of 3.5 percent was a 50-year low. When the pandemic produced one of the fastest and deepest recessions in US history, Trump and the Congress pushed through the CARES Act, injecting $2.2 trillion into the economy and preventing a collapse. Unemployment peaked at 14.8 percent in April 2020, the highest level since the Great Depression, but had been pushed down to 6.7 percent by the time of Biden’s election victory in November 2020.
Next came a series of stimulus packages: post-election Covid relief spending of $900 billion in the December 2020 budget, followed by a series of measures by the Biden administration. The American Rescue Plan Act of early 2021 injected $1.8 trillion into the economy, and was credited by Wall Street analyst firm Moody’s with avoiding a second recession. Profit rates as measured by the US government hit their highest since 1950.
More big spending followed: the $1.2 trillion Infrastructure Investment and Jobs Act in 2021 and, in the following year, the $52.7 billion tech-focused CHIPS and Science Act and the Inflation Reduction Act, which included $500 billion in new spending and tax breaks with a climate change and infrastructure focus. The result was the biggest fixed capital formation in the US in decades as manufacturing construction soared. A writer for the Brookings Institution, a think tank, called this trio of legislation a “national pivot”. The business magazine Fortune called it a “headlong dive into industrial policy”.
The Democratic administration’s stimulus-and-build program was a more sophisticated attempt at industrial policy than Trump’s crude tariffs-plus-tax-cuts method. But it wasn’t enough to lift the political fortunes of Biden and his vice president and would-be successor, Kamala Harris. Not only was it overwhelmed by the global inflationary wave that sent living standards backwards, it was too little and too late to create enough well paying jobs to revive and energise a Democratic base by election day in 2024.
Microchips and other high-tech manufacturing require huge investments but create few jobs. So Biden’s program lacked the immediate social and political impact of the 1930s New Deal jobs programs of President Franklin Roosevelt. And while promised manufacturing jobs awaited the building of new factories, the Biden-Harris administration hammered workers, ending pandemic income relief by cutting the expanded child tax credit (CTC). As journalist Ryan Cooper noted, “[T]he end of the brief CTC expansion made for a terribly toxic combination with the end of the pandemic pop-up welfare state”. That helped smooth Trump’s path back to the White House.
Trump inherited this economy—along with an established get-tough-on-China and rebuild-America bipartisan policy context—when he took office in January 2025. He then dramatically upped the stakes with the “Liberation Day” announcements of steep tariffs on scores of countries, including an island inhabited only by penguins. Since then, tariffs have fluctuated based on various agreements and a US Supreme Court decision invalidating many of them. But they remain on average the highest import duties since the 1940s.
Many leading US capitalists considered the Liberation Day tariffs destabilising, even if they were sympathetic to tariffs as a negotiating ploy. But Trump wanted to force a quick shift in business behaviour. The goal was to reshape global trade and investment patterns to benefit the US while allowing him to posture to his electoral base as a defender of the working class. Manufacturing jobs, however, declined by 91,000 between January 2025 and January 2026, before rising modestly in the first quarter of 2026 to 12.6 million. Yet Trump isn’t relying on tariffs alone to stimulate investment. Building on Biden’s pro-manufacturing policies, Trump’s budget bill allows businesses to fully deduct from their taxes the costs of building new factories.
Tariffs are just one front in a trade war fused to several imperialist power plays, from US threats to annex Greenland and, less seriously, Canada, to the kidnapping of Venezuelan President Nicholas Maduro. However, Trump failed in his central aim of forcing China to cave under sky-high tariffs of 145 percent after Beijing retaliated by cutting rare earth exports critical to US manufacturing. This led to a trade truce largely on China’s terms. Trump’s much-hyped May 2026 visit to China with several tech CEOs in tow, including Elon Musk, yielded modest results in promised US exports to China, chiefly soybeans and a smallish order of Boeing jets. “Trump and top CEOs leave a more self-reliant China with few deals to show for it”, CNN observed. After the Supreme Court tariff decision, the baseline was 10 percent with higher duties on steel, autos, pharmaceuticals and more that pushed the average to about 30 percent. Meanwhile, the Trump administration was compelled to pay importers $94 billion in tariff refunds.
The US had been moving away from the supposed rules-based trade order for years, going back to the Obama era sabotage of the World Trade Organization and the “buy American” requirements of the Great Recession government spending of 2009. These were a precursor to Trump’s 2017 tariffs that Biden kept in place.
Today, Trump is replacing the old trade blocs and dispute systems with a hub-and-spoke model with the US at the centre. There is now a broad consensus across political parties for an economic nationalism that puts AI, aerospace and tech-driven rearmament at the forefront of a program for US industrial revival to counter China and rebuild the US defence industrial base. The stimulus and pro-manufacturing tax breaks have accelerated the turn to US domestic production, with energy production and AI at the centre.
Republicans and Democrats embrace this approach. Biden’s Department of Defense issued the first-ever National Defense Industrial Strategy in January 2024 to “catalyze generational change from the existing defense industrial base to a more robust, resilient, and dynamic modernized defense industrial ecosystem”. Trump put his own stamp on this effort, insisting on a “golden share” for the US government as a condition for a Japanese company’s takeover of US Steel, and investing billions in multiple other companies in what a leading foreign policy journal calls “Trump’s state capitalism”.
Big business leaders sometimes grumble about Trump’s heavy-handed interventions, but embrace his economic nationalism. “It has become painfully clear that the United States has allowed itself to become too reliant on unreliable sources of critical minerals, products and manufacturing—all of which are essential for our national security”, Jamie Dimon, CEO of JPMorgan Chase, the biggest US bank, said when announcing a $1.5 trillion investment fund for key minerals and technologies last year.
A few weeks later, the US Council on Foreign Relations, the top foreign-policy think tank, weighed in with a book-length report, US Economic Security: Winning the Race for Tomorrow’s Technologies. It declared: “[T]he United States is engaged in an unprecedented competition with China across military, political, economic, and technological domains. It is therefore imperative that we address the most immediate challenges facing US economic security”. Notably, Biden’s former commerce secretary, Gina Raimondo, was a key author.
Thus, by the time Trump’s Pentagon proposed a $1.45 trillion military budget amid the Iran war, the military-industrial complex that President Dwight Eisenhower warned against was shifting into high gear.
The AI economic accelerator
The release of ChatGPT in late 2022 set in motion the greatest investment boom in US history, surpassing the national railroad expansion of the 1870s and the dot-com internet investments of the late 1990s. In the first half of 2025, spending on AI data centres accounted for nearly all US economic growth, according to a leading liberal economist. Much of the data centre spending is on AI chips imported from Taiwan. But it also radiates throughout the economy, from construction companies and electric power utilities to the revenue of big cloud computing companies that sell AI services to businesses at premium prices. Competition compels such investments, as AI requires power, cooling and networking that older data centres cannot handle.
The AI investment in 2026 could be the equivalent of 2 percent of US GDP, which may seem modest until one considers that US GDP was $30.8 trillion in 2025. The AI spending dovetails with the wider favourable conditions for investment in manufacturing created by Biden’s policies, including new semiconductor plants, which drove two-thirds of manufacturing construction by 2024. Trump’s tax cuts of 2025 provided still more incentives, cutting the cost for machinery, fleet and equipment by 21 percent.
Sceptics have compared the AI investment boom to the tech bubble of the late 1990s and predict a bust. While the boom will certainly end, as all capitalist expansions inevitably must, there are important differences this time. The concentration of technology markets in the hands of a handful of Big Tech companies allowed them to fund their initial investments with their own cash. Only more recently have they begun to issue bonds— totalling $121 billion in 2025, a nearly fourfold increase over the previous four years. This figure does not count off-books “shadow debt”, much of it from private credit, making AI-related financial risk impossible to assess. “The hidden risks are building, we don’t know if that’s ever going to come up”, a prominent Wall Street economist noted this year.
A key feature of the AI economy is tens of billions in circular financing among chip manufacturers NVIDIA and AMD, cloud computing giants Amazon, Microsoft, Google and Oracle, and AI companies such as OpenAI and Anthropic. It’s a multi-trillion-dollar scorpion dance, as established Big Tech firms sell computing capacity to fast-rising AI rivals while holding on to their corporate customers as well as the consumer market, which Meta aims to dominate with its own AI efforts.
If excessive spending ever does get Big Tech and its AI frenemies into trouble, they have a reliable backstop in the US government. The US semiconductor industry has always been central to the US military, and the AI generation is now cashing in. Elon Musk thus merged his X.ai venture with SpaceX, a company critical to US military and civilian space programs. Former Google CEO Eric Schmidt is reviving the military-Silicon Valley nexus that gave rise to chip maker Intel, in which the Trump administration took a 10 percent stake. Marc Andreessen and his partner Ben Horowitz, billionaire tech venture capitalists and Trump backers, are focused on AI and defence. “The technology landscape that we will be investing into is ... intensely competitive with China ... At this moment of profound technological opportunity, it is fundamentally important for humanity that America wins”, Horowitz said in an interview.
The exemplar of this trend is Palantir, an AI company holding contracts with US intelligence services and immigration agencies and the provider of targeting technology for the Israeli military to assist the genocide in Gaza. Trump’s AI policy chief, David Sacks, is big tech’s agent in the White House. The godfather of the tech-Trump-AI alliance is Oracle CEO Larry Ellison, who is close to both Trump and Israeli Prime Minister Benjamin Netanyahu, and whose company has deep relationships with the US and Israeli militaries.
The entry of AI into the longstanding Pentagon-Silicon Valley network underscores the role that AI will play in the wider economy. While US policy wavers between a hands-off approach and some nominal regulation as a concession to the growing anti-AI backlash, there is no question that AI is central to corporate America’s drive for competitiveness and the projection of US imperial power. If the AI bubble bursts, the biggest players will get a bailout.
Stocks, profits, debts, deficits and doubts
Tech companies’ disproportionate weight in the US stock market is unprecedented. Just seven—Amazon, Apple, Alphabet, Meta, Microsoft, NVIDIA and Tesla—account for more than 30 percent of the value of the S&P 500, an index of the biggest 500 publicly traded companies in the US. All have market values exceeding $1 trillion as investors hope to cash in on AI. Certainly, their share prices will fluctuate and may even dive sharply when the AI boom runs its course. But the current stock price surge is based not only on AI, but on record profits.
Consider the US government’s own measure of profits before and after taxes. Corporate profits before taxes have reached $4.2 trillion, or 13.7 percent of GDP. Since 2021, corporate profits before taxes have been at their highest since the Second World War and the Korean War, when military production was the driver. Trump’s biggest gift to capital—an effective tax rate of about 16 percent—funnelled the great majority of these profits into corporate coffers and benefited shareholders, adding to a concentration of wealth in the US more extreme than even in the days of the robber baron capitalists of the late 1890s. While technology companies were central to these profits, other sectors also scored big: financial services, oil and gas, and infrastructure-related industries benefited from the investment boom. Manufacturing profits were beginning to flow strongly in 2025, even if the promised jobs boom was more of a trickle.
It is too soon to say whether this represents a long-term restoration in the rate of profit and a sustained increase in the average US economic growth. Following the Great Recession, US GDP growth averaged 2.4 percent per year, jumping to an average of 3.3 percent from 2021 into 2025 amid the post-Covid recovery and economic stimulus. Nevertheless, it marks a big turn in the US economy—a boom driven by industrial capital investment for the first time in decades. Whether this is sufficient to counter China’s challenge is a separate question. But the US economy is being reshaped by a revived industrial sector.
This boom has several contradictions. Some are chronic, others are Trump-induced. Deficit spending by Congress has been amplified by Trump’s tax cuts, while the high level of government borrowing since the Great Recession and immediately after the pandemic has pushed federal debt to more than 100 percent of GDP. Some of this is the result of the calculation by successive US administrations that the lack of a credible international alternative to the US dollar as a universal trading currency means that buyers will always be found for US government bonds to finance that debt. Trump wants to double down on this bet by pressuring the Federal Reserve to lower interest rates to fuel an even hotter economy, tolerating higher inflation as a means to reduce government debt in real terms over time.
The other factor is that even US capitalists who oppose Trump have mostly kept their mouths shut while benefiting from his smash-and-grab agenda of cutting taxes and slashing social spending. They may complain about Trump’s government deficits but see them as political cover for still more cuts in social programs.
From boom to bust?
The AI spending boom looks unhinged, and the associated debt could detonate a financial crisis and undermine US economic growth. But from the standpoint of the companies involved, the decision to undertake vast investments is perfectly rational if it allows them to retain market dominance. In the view of US government officials across successive administrations, tech companies are the flagships of a new wave of industrial investments encouraged by government policies, demanded by national security considerations and serving as economic engines, with serious regulation unlikely unless popular pressure or a crisis forces the issue.
Debt is the wild card in this high-stakes AI investment poker. The novelty of private credit’s big role in the financial system—along with shadow banks and cryptocurrency outfits—makes it impossible to do more than speculate about the impact of an AI bust. And the ripple effects of the energy crisis created by the US war on Iran have disrupted global supply chains and hit consumer demand in the US, which could also drag down growth despite the uneasy war settlement.
When the AI expansion finally ends, working-class people already soured by the current economy are likely to turn bitter.
