A 3D-printed miniature model depicting US President Donald Trump, the Chinese flag, and the word "tariffs" in this illustration taken on April 17, 2025.
In the three months before US President Donald Trump dropped widespread tariffs on April 2, aka “Liberation Day,” the American economy contracted 0.3% at an annualized rate, a sharp drop from the 2.4% annualized rise in the final quarter of 2024. Economists were already worried that a recession was looming, and now the world’s largest economy is heading in that direction.
“The true disruptive effects are only beginning to be felt and will start playing out over the ensuing quarters,” says Robert Kahn, Eurasia Group’s managing director of Global Macro.
It’s not me, it’s you. Last year, Trump tried to take credit for the booming stock market, even though he was not in power. He inverted the argument on Wednesday, pinning the blame for the struggling economy on his predecessor, Joe Biden, while urging Americans to “BE PATIENT!!!” Though the midterm elections are still 18 months away, Trump’s pleas for patience show he’s wary of the political effects of a receding economy.
“Today’s data are a reminder that the political costs of a recession are going to be broad-based and significant,” Kahn added.
They’re not the only ones. China, the object of Trump’s tariff ire, also faces an economic slowdown. Chinese factories saw their sharpest monthly slowdown in over a year, per the National Bureau of Statistics, after the US president raised levies on their products to 145%. Beijing released a video on Tuesday reiterating that it “won’t kneel down to Trump,” an apparent signal that the trade war won’t end soon.
Actions speak louder than words. Despite the rhetoric, China is tempering some of its retaliatory measures. It created a list of US-made goods that will be exempt from its 125% counter-tariff. It’s not clear which products will be on this “whitelist,” but China has already spared the imports of microchips and aircraft engines – among other items – from its list. The White House has also made exceptions for Chinese imports three weeks ago, allowing smartphones and other tech devices to enter the United States with just a 20% tariff, and Trump predicted on Tuesday that he’d strike a trade deal with China.
A “painful truce,” as Kahn put it, may be inbound.