Early signals indicate a slowdown in the U.S. economy due to tariffs from President Trump, with GDP growth dipping to 2.8% in 2024. This downturn poses threats to global economic growth, particularly affecting India’s export-dependent economy, which targets a 6.5% growth for 2024-25. Economic forecasts predict potential declines in consumer spending and global trade as the trade war intensifies.
Recent indications highlight a deceleration in the U.S. economy before the potential impact of President Donald Trump’s trade policies manifests. In 2024, U.S. GDP growth reached 2.8%, slightly down from 2.9% in 2023 as Q1 saw a low of 1.6%. Results improved in Q2 and Q3 at 3% and 3.1%, yet a downturn occurred in Q4 with a decrease to 2.3%. The vitality of consumer and government spending significantly contributed to these fluctuations.
Upon taking office, President Trump enacted various tariffs, including a 25% tax on imports from Canada and Mexico and a 10% tariff on Chinese goods, sparking retaliation and escalating trade tensions. Notably, a trade war emerged as Canada, Mexico, and China imposed their own tariffs on U.S. goods in response.
Despite expectations for tax cuts to enhance economic activity, the House of Representatives approved a budget blueprint without new tax incentives. Trump suggested that cost savings from government efficiency initiatives could be distributed to the public, although the feasibility of achieving substantial savings remains uncertain.
Economic forecasts indicate a potential contraction of 1.5% in U.S. GDP for Q1 2025, attributed to declining consumer spending and diminished private investments. Reports note a 0.5% decrease in consumer spending in January, undermining business confidence and future investment prospects.
The repercussions of a slowing U.S. economy extend to the global scale, as it dampens projected economic expansion for 2025 to 3.3%, trailing behind historical averages. Given the importance of exports, India’s ambition to achieve a 6.5% growth rate in 2024-25 would require a robust performance in Q4. However, the ongoing trade war could hinder these export aspirations and impact India’s overall GDP growth.
In summary, the U.S. economy is exhibiting signs of slowing growth, primarily due to tariffs implemented by President Trump that have sparked retaliatory measures from other nations. This deceleration is likely to have a ripple effect on global economic conditions, particularly affecting countries like India, which relies heavily on exports. As forecasts predict further challenges ahead, the interconnected nature of global trade necessitates careful monitoring and adaptive strategies.
Original Source: www.livemint.com
