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The newest financial report card on Donald Trump’s commerce conflict is out, and it seems to be dour.
The US economic system contracted by an annualised 0.3 per cent within the first quarter of 2025, based on information revealed yesterday by the Bureau of Financial Evaluation. A surge in imports from firms stockpiling merchandise earlier than Trump’s tariffs hit had weighed on the determine, whilst funding and client spending rose.
The contraction, the primary since 2022, was worse than economists’ most up-to-date forecasts, and got here because the US trade deficit touched an all-time high, based on figures revealed by the Census Bureau on Tuesday.
The president was characteristically fast to shake off any blame. In a publish on Reality Social, Trump insisted that the figures had “NOTHING TO DO WITH TARIFFS”. He pinned the contraction on Joe Biden and added: “When the increase begins, will probably be like no different. BE PATIENT!!!”
Economists mentioned they anticipated a rebound within the second quarter as imports fall and stockpiles make their approach on to retailer cabinets. However additionally they warned that tariffs would start to hit home demand.
Eswar Prasad, a professor at Cornell College, mentioned that the robust client spending figures earlier this 12 months have been “a poignant reminder of what might need been a swish comfortable touchdown till the sweeping tariffs threw the economic system off target”.
Past GDP, Wall Road is raring for indicators that the administration is making progress on new commerce agreements within the 90-day window earlier than Trump’s so-called “reciprocal tariffs” take impact.
“The market is hyper-focused on these early commerce offers,” Goldman Sachs president John Waldron said in an interview with the Financial Times.
Former Treasury secretary Janet Yellen was extra blunt. She instructed the Monetary Occasions that the tariffs would have a “tremendously adverse” impact on the world’s largest economic system.
I’m not but able to say that I’m forecasting a recession, however definitely the chances have gone approach up
The newest headlines
What we’re listening to
Trump’s high financial adviser Stephen Miran struggled to soothe leading bond investors with a pitch about tariffs that folks with direct data of the assembly mentioned was “incoherent”. [Free to read]
The chair of the Council of Financial Advisers met representatives from main traders on the White Home’s Eisenhower Govt Workplace Constructing final Friday. Attendees included representatives of hedge funds Balyasny, Tudor and Citadel, in addition to asset managers PGIM and BlackRock.
Individuals conversant in the assembly instructed the Monetary Occasions that Miran did little to assuage their fears concerning the latest tumult in monetary markets. US authorities bonds offered off sharply after the president’s so-called “liberation day” tariff announcement on April 2, and Wall Road shares have sunk about 7 per cent because the starting of Trump 2.0.
Miran additionally caught agency to the administration’s line that tariffs would damage buying and selling companions greater than the US, based on assembly attendees. One participant mentioned he appeared “out of his depth”.
“[Miran] obtained questions and that’s when it fell aside,” the individual added. “Whenever you’re with an viewers that is aware of quite a bit, the speaking factors are taken aside fairly shortly.”
Miran wrote a broadly learn be aware in November outlining plans for aligning world markets round US pursuits, together with by weakening the greenback. Since becoming a member of the administration, nevertheless, he has more and more sought to distance himself from these concepts, mentioned an individual conversant in the matter.
“Administration officers preserve common contact with enterprise leaders and trade teams about our commerce and financial insurance policies,” the White Home mentioned in response to questions concerning the assembly. “The one curiosity guiding the administration and President Trump’s decision-making, nevertheless, is the perfect curiosity of the American folks.”
Viewpoints
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By failing to gather environmental information, the US is on observe to change into a “rogue state” for climate science, writes science commentator Anjana Ahuja.
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Jason Furman, former chair of the White Home Council of Financial Advisers, outlines his technique for understanding financial information amid the “substantial turbulence” triggered by the administration’s new commerce levies.
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Trump is overplaying his hand within the world commerce conflict and dangers repeating the painful errors of Brexit, argues Chris Giles.
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Katie Martin lays out the long-term costs dealing with the US if Trump’s insurance policies additional dent the greenback’s standing as a load-bearing pillar of world finance.
