As a fiscally conservative Republican economist with 45 years of experience, I have never witnessed a President destroy and devastate an economy so rapidly. GDP is expected to fall by 4% with a spike in inflation during his first quarter in office.
At the outset of 2025, economic projections indicated a steady growth trajectory for the United States. Fannie Mae, for instance, had forecast a 2.5% seasonally adjusted annualized rate (SAAR) for GDP growth in the first quarter, anticipating continued robust consumer spending.
Shift in Trade Policies
However, the economic landscape has experienced significant shifts due to recent policy changes under the Trump administration. On February 1, 2025, President Donald Trump imposed tariffs on imports from Canada, Mexico, and China, citing national security concerns under the International Emergency Economic Powers Act (IEEPA). These measures included a 10% tariff on all Chinese imports, effective February 4, with an additional 10% increase announced on February 27, set to commence on March 4. Tariffs on Canadian and Mexican imports were initially suspended for 30 days but are slated to take effect on March 4.
Revised Economic Forecasts
In light of these developments, economic forecasts have been adjusted to reflect potential downturns. The Conference Board noted that while the U.S. economy started 2025 on strong footing, the unpredictability of current policies could weigh on growth and elevate inflation as the year progresses. The Federal Reserve’s GDPNow tracker of incoming metrics is indicating that gross domestic product is on pace to shrink by 1.5% for the January-through-March period.
Potential Risks Ahead
The trajectory of these economic indicators raises concerns about a possible recession. If current trends persist, the U.S. economy could face a downturn by mid-year, with broader implications for the global economy. Drawing parallels to the Great Depression, protectionist trade policies and strained international relations historically have had severe economic consequences. It is crucial to monitor these developments closely to mitigate potential risks to both domestic and global economic stability.