The US economy experienced a significant downturn in the first quarter of 2025, with the Federal Reserve Bank of Atlanta projecting a 2.7% decline in GDP, marking the worst performance since the Covid-19 pandemic. This decline is attributed to abrupt policy shifts by President Donald Trump, particularly new tariffs that have caused consumer and business uncertainty. The tariffs, intended to address a trade deficit labeled as a 'national emergency' by Trump, have instead exacerbated the deficit, reaching a record $162 billion in March. Consumer and business spending, critical to the US economy, showed signs of weakness due to harsh weather conditions early in the year and a temporary surge in retail sales as consumers rushed to avoid tariff impacts. Despite business investment holding up in March, there remains a pervasive sentiment of unease in the economic environment due to the unpredictable nature of the trade policies.

The US economy is projected to have its worst quarter since mid-2020, with the Federal Reserve Bank of Atlanta forecasting a 2.7% decline in GDP for the first quarter of 2025.

President Trump's abrupt policy shifts, particularly new tariffs, have caused significant uncertainty, affecting consumer and business sentiment and spending.

Despite the intention to address a massive trade deficit, Trump's tariffs have worsened the situation, with the deficit reaching a record $162 billion in March.

Consumer spending was initially weak in the first quarter due to harsh weather and wildfires but saw a temporary surge in March as people rushed to avoid tariffs on cars and auto parts.

Business investment has shown resilience despite the economic uncertainty, with a slight increase in March, although businesses remain uneasy about the future impact of trade policies.

Trump's tariffs included significant duties on goods from China, aluminum, steel, and vehicles, leading to retaliatory measures from trade partners like China and the EU.

The economic environment is further complicated by the ongoing trade tensions, with businesses and consumers grappling with the unpredictable impacts of the administration's policies.