Trump’s policies shrink US economy

ISTANBUL

President Donald Trump’s policies since he took office in January have led the US economy to contract, shrinking 0.3% in the first quarter, an expert told Anadolu.

The US economy grew 2.4% in the last quarter of 2024 and 2.8% overall last year. The recent shrinking is the first in 12 quarters, as the last time the US economy contracted was in the first quarter of 2022.

Analysts said the impact of Trump’s policies are starting to become evident, as seen in macroeconomic data, triggering recession concerns. Slowing consumer spending and a sharp decline in federal spending are some of the main drivers of the contraction.

US enterprises importing significant amounts of goods to avoid coming tariffs disrupted the trade balance, contributing to the contraction.

Zafer Ergezen, a futures and commodity markets expert, said the contraction was expected with Trump’s win, noting that as the president started trade wars, a slowdown in global trade was anticipated.

“Trump triggered an economic contraction while trying to ‘make America great again’,” he said, citing Trump’s signature slogan.

“The slowdown in global trade was expected to come with Trump’s trade and political policies but we started to see the first signs of the impact in the US,” he added.

Ergezen said the rise in tariffs and additional taxes on imports make some products “impossible to import” due to rising costs, slowing down demand.

“We also see a decline in supply rather than demand, paving the way for the US economy to enter a period of contraction,” he added. “This is because other countries are also imposing retaliatory tariffs on products exported by the US – high tariffs on high-in-demand products fail to enter the country, triggering a period of contraction in the US economy.”

The EU and Chinese economies are also slowing down, he said.

“As central banks around the world enter their rate cut cycles, we were actually expecting the economic slowdown but we expected it to recover this year – Trump reversed that a bit, and the reciprocal tariffs he imposed, which led to trade wars, show that the economic recovery will be delayed, while tariffs and interest rates are expected to remain high,” he said. “Central banks may not cut rates as quickly as expected and interest rates will remain high for a longer period of time.”

Ergezen said the situation may change as the US economy’s growth slows down, while the slowdown in the global trade continues, fueling inflation.

High inflation brings high interest rates, he said, citing Trump’s statements on Fed Chair Jerome Powell. “Trump has been complaining about Powell because the Fed isn’t lowering rates.”

“This may lead the Fed or other central banks to accelerate rate cuts. And maybe we may see the Fed cutting rates this period,” he noted.

Falling oil prices is another factor playing into inflation, but there has yet to be a significant amount of movement in oil prices to contribute to inflation, Ergezen said.

He emphasized that US tariffs could lead to rising consumer prices.

“We’ll be seeing whether rate cuts will take place in this kind of environment,” he said. “The world is questioning whether we’re entering a recession, as uncertainties remain – we may hear a lot about recession in the markets for some time to come.”