Trump stumbles the American economy

The American economy fell into the red in the first quarter of 2025, a first decline since 2022 which coincides with the start of the world Trade War launched by President Donald Trump and which augurs badly for the future. Elsewhere in the world, the first official statistics of 2025 are under the sign of gloom.

A first decline in three years

Even if President Donald Trump said it was the fault of the Biden administration, the first decline in the gross domestic product in the United States since 2022 is the result of its tariff policy. The significant increase in imports from American companies wishing to anticipate the president’s customs duties and the decline in government spending, one of the first observable effects of Elon Musk cuts in federal programs, partly explain the weakness of the American economy. After growth of 2.4 % in the last quarter of the year, GDP has a 0.3 % decline in annual rate in the first quarter of 2025.

For the moment, American consumers continue to spend and support growth, but the continuation of things could be more worrying, according to Francis Generous, economist at Desjardins, because confidence is deteriorating and personal income decreases.

“The next quarters could also display decreases in GDP, but this time, the negative sign will be heavier,” he said.

The stock markets have reacted very badly to this bad news which is added to all those of the past few weeks on the Commerce Front.

Canadian economy contracts

The Canadian gross domestic product (GDP) contracted in February, which was planned, but the decline was more pronounced than expected. With a decline of 0.25 % of GDP in February, the economy has experienced its worst performance from the last 26 months. The majority of the sectors have put the brakes, but the contraction was more important in the mining and oil sector and in the real estate sector.

The preliminary indications of Statistics Canada point to slightly positive growth in March, which would give GDP in positive territory for the entire first quarter of the year.

“This good start to the year should not continue, because uncertainty continues to reign,” said the economist of the National Bank Kyle Dahms. Unless a significant reduction in tensions with our southern neighbor, “the economy should weaken in the second and third quarter,” he said.

Mexico avoids recession

After deciding 0.6 % in the last quarter of 2024, the Mexican economy returned to positive ground in the first quarter of 2025 with growth of 0.2 %, according to the National Statistics Agency.

This modest rebound allows the country to avoid a technical recession, defined by two consecutive quarters of contraction of the gross domestic product. The Mexican economy remains fragile and dependent on the pricing policy of the United States, its main trading partner.

The International Monetary Fund and the World Bank predict that Mexico will find it difficult to avoid a recession this year, but the country’s president, Claudia Sheinbaum, believes that these forecasts do not take into account the economic stimulation plan of her government.

The Ministry of Finance of Mexico provides for economic growth of 1.5 to 2.3 % this year.

Europe surprises

The vitality of the European economy surprised in the first quarter of 2025, with growth of 0.4 %, which results in an advance of 1.2 % for the 20 countries of the Monetary Union. Ireland, Spain and Lithuania are the countries that have shown growth up in the first quarter.

In Germany, the largest European economy, the gross domestic product resumed life with a modest growth of 0.2 % in the first quarter, after a decline of 0.2 % in the last quarter of 2024. France did less well than expected, with a growth of 0.1 % to start the year, while Hungary recorded the only contraction of the economic union, or -0.2 %.

“While North America is struggling with these opposite winds that it is inflicted itself, Europe is quietly gaining ground,” notes the chief economist of CPA Canada, David-Alexandre Brassard.

“The pricing policies turn against us, it was predictable,” he said.

Falling orders for export of China in April

The increase in customs duties on American imports of products from China weighs on the second world economy, while export orders drop, according to the monthly surveys of Chinese factories published on Wednesday.

The official survey of the Chinese Logistics and Purchasing Federation shows that export orders have slowed heavily in April, while Beijing and Washington are in an impasse after US President Donald Trump has ordered combined customs duties of up to 145 % on Chinese goods.

China has imposed customs duties of up to 125 % on American products, with some exemptions. She also ordered other retaliation measures.

US companies cancel orders from China and postpone their expansion projects while waiting to see what will happen.

On a scale where 50 marks the rupture between expansion and contraction, the official index of the purchasing directors of the manufacturing industry (PMI indices) fell to 49.0, against 50.5 in March.

“The brutal fall in the PMI clues probably overestimates the impact of customs duties due to negative feelings, but it nevertheless suggests that the Chinese economy is under pressure while external demand cools,” said Zichun Huang, of Economics Capital, in a report.

At the start of the week, high Chinese economic officials also presented a support plan for the economy and argues their desire to do more to counter the impact of customs duties.

Associated Press