The US economy experienced an unexpected decline in Gross Domestic Product (GDP) of 0.3% (annualized) in the first quarter of 2025, following a growth of 2.4% in the final quarter of 2024. This downturn surprised experts who had anticipated a slight growth of 0.3%. The development marks a sharp slowdown and raises questions about the sustainability of the previous economic policies under President Donald Trump.
Causes and Context
Trade policy uncertainty is one of the main causes of this decline. Trump’s aggressive tariff policy, especially against China, has led to erratic trade announcements, exacerbating market turbulence.
In parallel with the GDP decline, the ADP report for April recorded only 62,000 new jobs in the private sector—far below the expected 115,000. Additionally, the International Monetary Fund has lowered its growth forecast for 2025 to 1.8%.
Reactions and Impacts
President Trump dismissed blame and predicted an “unprecedented boom,” while also calling for patience. The weak economic data may prompt the Federal Reserve to consider earlier interest rate cuts, while weak job numbers indicate declining consumer demand.
A point of interest is that the annualization of US growth data makes it not directly comparable to European quarterly rates.
Long-term Risks
According to the IMF, Trump’s trade conflicts are counterproductive: long-term efficiency losses could arise from disrupted supply chains and retaliatory measures from trade partners. This discrepancy between political announcements and real economic consequences could further delay investment decisions.