The decline of the US economy, more pronounced than estimated. The impact of Trump's commercial wars
US President Donald Trump presents an executive order on “mutual tariffs” at the White House, on April 2, 2025. Photo source: Hu Yousong / Xinhua News / Profimedia
The US economy has been annually contracted by 0.5% during January-March 2025, the first decline of the last three years, the commercial wars of President Donald Trump disrupting business, according to final data published on Thursday, Reuters and Associated Press, quoted by Agerpres.
In May, the US Department of Trade had announced that the US Gross Domestic Product has decreased by 0.2% in the first quarter of 2025, after a 2.4% advance in the last three months of 2024. Economists relying on a GDP increase between 0.3% and 0.8%.
The recoil in the first quarter comes from increasing imports, companies in the United States trying to bring goods from abroad before the Trump administration imposes customs duties.
Between January and March 2025, imports rose by 37.9%, the fastest rate starting in 2020 and deleted almost 4.7 percentage points from the growth of the US GDP. Government expenses decreased at a annual rate by 4.6%, the most severe decline since 1986, while consumer expenses, which are responsible for more than two thirds of the American economy, increased by only 0.5%between January and March 2025, after preliminary estimate had indicated an advance of 1.2%.
American companies, demoralized due to uncertainty
Economists expect a 0.3% US GDP growth in the second quarter of 2025. The preliminary data of the American Trade Department on the evolution of the economy during April-June 2025 will be published on July 30.
The confidence of American consumers is at the lowest level in the last five years, and companies are demoralized. Many companies have withdrawn their annual financial forecasts, citing the uncertainties regarding the expenses of the households, in the context of the effects of the customs duties.
Inflation would also increase this year, and economists expect the US federal reserve to resume interest rate reduction at a time.
Inflation remains the main economic concern for most Americans, even though consumption prices have dropped significantly compared to the tip reached in 2022. Donald Trump promised in the campaign that it will quickly reduce inflation, but the annual inflation is higher now than in September 2024, when it lowered up to 2.1%.
