US Risks Recession as Economy Contracts Under Tariff Pressure
The United States faces a growing risk of recession after official data revealed the economy contracted in the first quarter of the year—the country’s first decline in output in three years. The downturn was largely driven by a surge in imports, as businesses rushed to stockpile goods ahead of the implementation of President Donald Trump’s new tariffs.
The steeper-than-expected contraction sent stock markets tumbling, triggering a sharp sell-off in US assets. Economists warned that the figures reflect mounting pressure on the economy, with many suggesting that the downturn could deepen if trade tensions escalate further.
“At this point, it’s difficult to imagine how a recession could be prevented, aside from substantial further backpedalling on tariff policy,” said Richard Flynn, managing director at Charles Schwab. “Recent shifts in US trade policy have dramatically increased the probability of a recession, so it seems very likely that this slowdown will be amplified in the coming months.”
Former Vice President Kamala Harris was scathing in her criticism of Trump’s trade policies, branding the tariffs “reckless” and describing them as “the greatest man-made economic crisis in modern presidential history.” Speaking at a Democratic fundraiser, she added, “Some people are describing what’s been happening in recent months as absolute chaos. And of course I understand why. It’s certainly true of those tariffs. Tariffs that—as I predicted—are clearly inviting a recession.”
Economists noted that even after adjusting for the import surge, there were signs of broader economic weakness. Oliver Allen of Pantheon Macroeconomics commented: “There are clear signs that the economy already was fundamentally slowing. A period of stagnation now likely lies ahead if the current set of tariffs is maintained, with recession the most likely outcome if the additional reciprocal tariffs are imposed in full in July.”
Growth was also dragged down by a decline in government spending, including cuts to defence outlays.
The sharp reversal comes as a surprise given the economy’s recent strength. At the end of last year, the US was the joint-fastest growing economy in the G7. For 2024, it posted full-year growth of 2.8%, far outpacing Canada (1.5%) and the UK (1.1%).
President Trump, however, shifted the blame to his predecessor. In a post on his TruthSocial platform, he claimed: “This is Biden’s Stock Market, not Trump’s. I didn’t take over until January 20th. Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers.”
He added: “Our Country will boom, but we have to get rid of the Biden ‘Overhang.’ This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers, but when the boom begins, it will be like no other. BE PATIENT!!!”
Meanwhile, the Federal Reserve’s preferred measure of inflation showed a decline in March. However, much of the inflationary impact of the tariffs is yet to materialise, limiting the central bank’s ability to cut interest rates to support the weakening economy.
