The U.S. economy is facing tough times in 2025 and recent reports from Bloomberg and the International Monetary Fund (IMF) point to President Donald Trump’s trade policies as a major reason. The economy shrank in the first few months of 2025 and the IMF warns that the global economy is slowing down with the U.S. being one of the hardest hit advanced economies.
What’s Happening to the U.S. Economy?
According to Bloomberg the U.S. economy contracted by 0.3% in the first quarter of 2025 meaning it got smaller instead of growing. This is a big change from the 2.4% growth seen in the last quarter of 2024 under President Joe Biden. The contraction is the worst economic performance in three years and it’s raising concerns about a possible recession. A recession is when the economy shrinks for a long time causing job losses and higher prices.
The IMF an organization that tracks global economies says the U.S. economy will grow only 1.8% in 2025 down from 2.8% in 2024. This is a big drop and the IMF says there’s a 40% chance of a U.S. recession this year. The main reason? Trump’s trade policies especially his tariffs are creating problems for businesses and consumers.
What Are Trump’s Trade Policies?
Trump’s trade policies focus on tariffs which are taxes on goods imported from other countries. Since taking office in January 2025 Trump has imposed high tariffs on almost every country. For example he added a 10% tariff on nearly all imports and a massive 145% tariff on goods from China. He also placed 25% tariffs on steel and aluminum from countries like Canada, Mexico and the European Union. These tariffs started on April 2, 2025 and Trump calls them part of his “Liberation Day” plan to protect American workers and reduce the trade deficit.
Trump says tariffs will bring back manufacturing jobs to the U.S. and make other countries treat the U.S. fairly in trade. However many experts including the IMF warn that these tariffs are hurting the economy more than helping it.
Why Are Tariffs Causing Problems?
Tariffs make imported goods more expensive, which affects businesses and consumers.
- Higher Prices for Consumers: When tariffs increase the cost of imported goods companies pass those costs to customers. For example a high end iPhone could cost $2300 if companies like Apple pass on the tariff costs. Everyday items like clothes, shoes and food could also get pricier making life harder for American families.
- Business Uncertainty: Tariffs create confusion for companies that rely on global supply chains. For example carmakers like Stellantis and General Motors have announced layoffs and factory closures in the U.S., Canada and Mexico because of higher costs. Businesses are delaying investments because they don’t know how tariffs will change next.
- Retaliation from Other Countries: Countries like China, Canada and the European Union have responded with their own tariffs on U.S. goods. China imposed 125% tariffs on American products making it harder for U.S. companies to sell abroad. This hurts farmers manufacturers and other exporters.
- Stock Market Volatility: The uncertainty from tariffs has caused stock markets to drop. The S&P 500 lost nearly 10% of its value in 2025 and the Dow fell 4% in a single day. This affects people’s savings and retirement funds.
How Is the Global Economy Affected?
The IMF says Trump’s tariffs are slowing down the entire world economy. Global growth is expected to fall to 2.8% in 2025 down from 3.3% in 2024. This is a big downgrade from earlier predictions. Countries like Canada, Mexico and China are also seeing slower growth because of the trade war. For example Mexico’s economy is expected to shrink by 0.3% in 2025 and China’s growth is down to 4%.
The trade war is disrupting global supply chains which are like networks that move goods around the world. When tariffs make it harder to trade companies struggle to get the materials they need and prices go up everywhere. The IMF warns that if the trade war gets worse it could push the global economy into a recession.
What Are the Risks?
The IMF and other experts see several dangers ahead:
- Inflation: Tariffs are expected to push U.S. inflation to 4% or higher by the end of 2025 up from about 2% now. This means prices for everything could keep rising.
- Recession: JPMorgan says there’s a 60% chance of a U.S. recession and the IMF puts the global recession risk at 30%.
- Financial Market Chaos: The trade war is causing stock and bond markets to swing wildly which could hurt investors and businesses.
- Job Losses: While Trump says tariffs will create jobs companies are already cutting workers because of higher costs and lower demand.
Can This Be Fixed?
The IMF suggests that countries should work together to reduce tariffs and make clear trade rules. Trump has paused some tariffs for 90 days to negotiate deals but the high tariffs on China and other countries are still in place. If Trump lowers tariffs or makes fair trade agreements it could help the economy. However his team insists tariffs are necessary to protect American workers so it’s unclear if he will back down.
What Does This Mean for You?
For everyday Americans the trade war could mean higher prices for groceries, clothes and electronics. Small businesses might struggle to compete and some workers could lose jobs if companies cut back. On the other hand Trump’s supporters believe tariffs will bring back manufacturing jobs and make the U.S. economy stronger in the long run.
Conclusion
The U.S. economy is shrinking in 2025 and Trump’s tariffs are a big reason why. While he aims to protect American workers the trade war is raising prices slowing growth and hurting businesses. The IMF warns that the global economy is suffering too and the risks of recession and inflation are growing. The next few months will be critical as the world watches whether Trump sticks with his tariffs or finds a way to ease tensions. For now Americans and people worldwide are feeling the impact of this economic shake up.