US economy is shrinking: Trump's tariff policy under fire!

US economy is shrinking: Trump's tariff policy under fire!

The US economy experienced an unexpected 0.5% decline in gross domestic product (GDP) in the first quarter of 2023. This is the first decline in three years and exceeds the original estimate of a decline of just 0.2%. Analysts attribute this decline to the trade conflicts and tariff policies under President Donald Trump, which are placing significant strain on international trade relations and weakening consumer and business confidence. IT Boltwise reports, consumer spending grew just 0.5% over the same period, a sharp decline compared to a 4% increase in the previous quarter.

Criticism of Trump's economic policies has increased on social media and from political opponents who blame him for recent negative economic news. Amid these challenges, Trump renewed his criticism of Federal Reserve Chairman Jerome Powell for pointing to a lack of interest rate cuts. Analysts warn that tensions between the government and the central bank could worsen further, exacerbating economic challenges.

Economic forecasts and consumer sentiment

Although the US economy recovered after the corona pandemic, it began to weaken towards the end of 2024. This meant that economic institutes had to adjust their forecasts, which also resulted in strong fluctuations on the stock markets. The International Monetary Fund (IMF) lowered its growth forecast for 2025 from 2.7% to 1.8%. Inflationary trends, which were high in 2022, have declined under President Biden, but even under Trump, inflation remains a key concern as prices do not return to previous levels. ZDF reports, that consumer sentiment is at a low, similar to three years ago.

Difficulties in the economy could also have political implications, as sentiment has risen among Republicans while it has fallen among Democrats and independents. Recent developments in the stock market movement are also alarming; Trump's tariff policy has led to a global collapse on the stock markets, with the S&P index temporarily losing over 13%. Although markets rebounded following tariff suspension announcements, they are still below levels seen at the start of Trump's term.

Given current developments, US economic policy could continue to be targeted by Trump as the country heads towards upcoming elections and associated political challenges.