SUMMARY
- It has been just over a month since President Trump’s ‘Liberation Day’ where he announced sweeping reciprocal tariffs. While many countries have already engaged with the U.S. in trade negotiations, trade between the U.S. and China has been severely disrupted and the impact of tariff pressures is beginning to emerge in economic data.
- For example, driven by a surge in imports ahead of Trump’s tariffs, preliminary estimates show that the U.S. economy shrank in the first quarter of 2025, declining at an annualized 0.3% quarter-over-quarter. This marked the first quarterly contraction since the first quarter of 2022. In April, the ISM manufacturing PMI remained in contractionary territory, with new orders continuing to decline and cost pressures persisting.
- In China, economic momentum stalled in April as both domestic and international demand weakened. Factory activity posted its steepest contraction in 16 months, and new orders dropped to their lowest level since 2022.
- While earlier data may have reflected front-loading ahead of tariffs, the full impact of tariff pressures is now beginning to emerge in the economic data. Whether the trade war pushes China and the U.S. into a recession remains to be seen.
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