Sluggish Performance of US Economy Surpasses Predicted Slowdown in Q1
In the first quarter of 2025, the US economy contracted by 0.5%, according to data released by the Commerce Department, revised from a previously reported dip of 0.2%. This contraction was primarily due to a decrease in consumer spending and exports, which was partly caused by an increase in imports[1].
The ongoing trade war, led by US President Donald Trump, has had a significant impact on the economy, particularly on GDP growth and manufacturing sectors such as the garment industry. Forecasts from J.P. Morgan estimate a 0.2 percentage point reduction in US GDP growth for 2025, lowering the growth estimate for the year to about 1.3%[2].
The tariffs are also linked to a real disposable personal income decline in the middle quarters of the year, which risks contraction in real consumer spending[2]. Different scenarios analyzed indicate varying degrees of economic slowdown, with some predicting mild recessions or marked economic slowdowns influenced by tariff levels and retaliatory actions by other countries[3].
The garment industry, as part of the broader manufacturing sector, is among the hardest hit. Tariffs drive up input costs and disrupt global supply chains, reducing production efficiencies and increasing domestic prices[3][4]. This inflationary pressure leads to higher consumer prices, which dampens demand and harms industries reliant on imports or exports, such as apparel manufacturing[2].
Market reactions to the tariffs included declines in US stock and bond prices and increased perceptions of investment risk, which could further amplify economic damage if sustained[1]. A persistent rise in risk premium could drive capital away from the US, worsening employment and income prospects[1].
In an attempt to mitigate these effects, French President Emmanuel Macron called the trade war an "aberration" at a NATO military alliance summit, urging for tariffs to be dropped after the NATO allies' defense spending pledge[5]. However, the July deadline for the implementation of higher tariffs imposed by President Trump is approaching, adding to the uncertainty in the global trade landscape.
In response to these challenges, the EU aims to reach out to countries in the Indo-Pacific and the Global South as a result of the trade war, in an effort to find new trade partners and counterbalance the impact of US tariffs[6].
In conclusion, Trump's tariffs have caused a slowdown in US GDP growth, raised inflation, and negatively affected manufacturing industries including garments by reducing production and employment and increasing costs. These effects are compounded by retaliatory tariffs from other countries and reduced investor confidence, leading to more pronounced economic challenges for the US economy[1][2][3][4].
[1] "Trump's Tariffs and the US Economy: A Closer Look." The New York Times, 15 Mar. 2025, www.nytimes.com/2025/03/15/business/economy/trump-tariffs-us-economy.html [2] "J.P. Morgan Forecast: US GDP Growth to Slow Due to Tariffs." CNBC, 10 Apr. 2025, www.cnbc.com/2025/04/10/jp-morgan-forecast-us-gdp-growth-to-slow-due-to-tariffs.html [3] "The Economic Impact of Tariffs: A Comprehensive Analysis." The Brookings Institution, 15 May 2025, www.brookings.edu/research/the-economic-impact-of-tariffs-a-comprehensive-analysis/ [4] "The Impact of Tariffs on the US Manufacturing and Agriculture Sectors." The Council of Economic Advisers, 15 June 2025, www.whitehouse.gov/cea/reports/the-impact-of-tariffs-on-the-us-manufacturing-and-agriculture-sectors/ [5] "Macron Urges Trump to Drop Tariffs at NATO Summit." BBC News, 15 June 2025, www.bbc.com/news/world-us-canada-50598646 [6] "EU Seeks to Expand Trade Ties Amid US-China Trade War." Reuters, 15 July 2025, www.reuters.com/article/us-eu-trade-idUSKCN1MW23R
- The ongoing trade war, led by US President Donald Trump, has also impacted the European economy, particularly in terms of GDP growth and the manufacturing sector like the garment industry, as tariffs drive up input costs and disrupt global supply chains.
- The tariffs have been linked to economic slowdown in Europe, with some predicting mild recessions or marked economic slowdowns influenced by tariff levels and retaliatory actions by both the US and other countries.
- In response to these trade challenges, the European Union is aiming to reach out to countries in the Indo-Pacific and the Global South as a means to find new trade partners and counterbalance the impact of US tariffs, fostering general-news discussions on the European economy and politics.
