Saturday, March 29, 2025
The US economy shrinks 2025 in the first quarter as President Donald Trump’s renewed tariff-heavy strategy fuels uncertainty and sparks global retaliation.
The US economy contracted by 0.3% in Q1 2025, marking the first economic shrinkage since early 2022. The drop follows a 2.4% growth rate in the final quarter of 2024 and comes amid a barrage of new tariffs imposed by President Trump in his second term. Economists warn the nation is teetering on the edge of a technical recession—typically defined by two consecutive quarters of negative growth.
April saw a dramatic 32% plunge in consumer sentiment, dragging the index to its lowest point since the 1990 recession. The sharp decline reflects widespread anxiety about the rising cost of living, trade uncertainty, and market instability linked to Trump’s aggressive tariff rollouts.
Throughout Q1, Trump imposed and threatened sweeping new tariffs, targeting major trading partners like Canada, Mexico, and especially China. Although some of these measures were later scaled back, a universal 10% import tariff remains in place for most nations, alongside a steep 145% tariff on Chinese imports.
Early in Q2, Trump suspended further “reciprocal tariffs”—as high as 49%—for 90 days following volatility in the stock market. At the same time, US automakers received partial relief, as an executive order allowed credits for domestic assembly of vehicles made from imported parts.
In response, China slapped a 125% tariff on US goods and warned against further economic coercion. “Compromise only encourages more bullying,” said Chinese Foreign Minister Wang Yi.
Despite claiming that tariffs are a negotiation tool, Trump’s tactics are being met with resistance worldwide. The possibility of a broader trade war looms if escalations continue.
Amid backlash, Trump reportedly considered removing Federal Reserve Chair Jerome Powell, who cautioned that tariffs could cause long-term price inflation. After market turmoil, Trump reversed course, assuring reporters he would not fire Powell.
As the US economy shrinks 2025 and markets remain volatile, concerns grow about the sustainability of Trump’s protectionist agenda. Analysts say unless there’s a swift resolution to trade disputes, the economy may face another quarter of contraction.
