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In the recent quarter, the US economy has witnessed a significant slowdown, coinciding with an aggressive trade policy articulated by Donald Trump, who asserted that imposing extensive tariffs globally would bolster the nation’s economic framework.
The Gross Domestic Product (GDP), a vital indicator of economic performance, saw a contraction of 0.3% in the first quarter, a drop from the 2.4% growth recorded in the preceding quarter of 2024. This marks the first decline since early 2022 and brings the US closer to a technical recession, which is commonly defined as two consecutive quarters of negative growth.
This economic downturn is further reflected in a dramatic decrease in consumer sentiment, which plummeted by 32% in April, reaching its lowest point since the recession of the 1990s.
During the first quarter, Trump focused on imposing, and briefly activating, extensive tariffs on trading partners like Canada and Mexico, and significantly raised duties on Chinese exports.
As the second quarter began, a period not included in the recent GDP report, Trump escalated his tariff strategy by instituting even higher tariffs on various imports before retracting those on all but Chinese goods. Currently, a 10% universal tariff applies to a range of imported goods, while a steep 145% tariff targets China’s imports.
bar chart showing GDP figures from last quarter of 2020 to first quarter of 2025
Reacting to dramatic shifts in the US stock market, Trump has postponed a proposed set of “reciprocal tariffs” of up to 49% on select countries for a period of 90 days.
To aid US automakers facing a looming 25% tariff on all auto imports, Trump signed an executive order offering credits for auto parts imported, provided the assembly occurs within the United States.
Last week, stock prices rallied following Trump’s announcement that tariffs on China—already exempting certain electronics—would see significant reductions as negotiations between the White House and China continue. However, Trump also noted that these tariffs would not be entirely eliminated. In response, China has introduced a 125% tariff on American products as retaliation for Trump’s moves.
While the White House maintains that Trump’s tariffs serve as a negotiation tactic, global leaders have voiced their intent to retaliate if America continues its aggressive trade stance.
“Choosing silence or submission encourages the bully to be more audacious,” stated Chinese Foreign Minister Wang Yi recently.
Trump has shown a heightened sensitivity to the criticism surrounding his tariffs and their ramifications on the economy. During the past month, at one point, he threatened to dismiss Jerome Powell from his position as chair of the US Federal Reserve after Powell indicated that Trump’s tariffs could result in long-lasting price increases.
Following a market downturn, Trump eventually reassured reporters that he had “no intention” of firing Powell, indicating his acknowledgment of the delicate balance between trade policies and economic stability.
Source
www.theguardian.com