USA: An Economic Snapshot Amidst Tariff Uncertainties

By Marianne Mineo, Economist at Silverhorn Group

Published on May 12th, 2025

The first quarter of 2025 showed a mixed outlook for the US economy as tight monetary policy and uncertainty surrounding Trump's tariffs dominated economic discussions. Q1 GDP growth is expected to be just 0.3%, according to some analysts (1), contrasting the 2.4% growth in Q4 2024. However, many see this as the “pain” before the “gain”, and projections expect growth to increase through the year and into 2026.

The dramatic reaction to the Atlanta Fed's initial forecast, which predicted a significant drop in US GDP for Q1 2025 and sparked fears of an economic collapse, was later revealed to be primarily due to a surge in gold imports, which temporarily skewed the data. After adjusting for this factor, the GDP forecast was revised to a 1.4% decline (2).

The labor market held steady, with unemployment hovering around 4.1% and job gains closely aligned with expectations. Notably, employment gains were in non-government sectors (3), marking a distinct change from the previous administration’s jobs reports. Although inflation was lowered slightly, with a 3.3% decrease in energy prices, it nevertheless remained above target at 2.8% (4). This prompted the Fed to maintain tight policy, but also to further scale back on quantitative tightening (5).

Though it may be “too little, too late” (6), what Trump is hoping to accomplish in the US economy is much needed, and the shift in focus by the Trump Administration to prioritize supporting Main Street—even if it comes at the expense of Wall Street (7)—has merit. If successful, it should eventually benefit the majority of US citizens, however, it also holds serious implications for those invested in US markets. This is reflected in their sharp decline since February’s highs, as US markets have greatly increased in risk making investors increasingly wary. That being said, investors have become so accustomed to high returns in recent years, it remains to be seen whether sentiment has truly soured (8).

While many agree in concept with what the Trump Administration is trying to accomplish, the method has engendered a fair amount of criticism (9), with concerns raised over the consequences the tariff policy will have on the US’ economy (10), its global trade relations (11), and its capital flows (12). These concerns have increased analysts’ recessionary forecasts (13), and present further negative implications to US markets, particularly if the trade war with China escalates to US-listed Chinese stocks. While this move is seen as unlikely by some analysts due to the potential for massive ramifications to US markets and liquidity concerns, it hasn’t been officially ruled out (14). Additionally, there is precedent since Trump has done this before in early 2021 when he delisted three Chinese companies: China Telecom, China Mobile, and China Unicom.

Given the way the trade war has been going, China would be unlikely to respond passively to such a move. According to a Barron’s report, “If Beijing orders Chinese investors to pull their money from US exchanges, the number is enormous: $370 billion, roughly the GDP of Denmark or Egypt”. UBS analysts stated, “Delisting represents a significant downside risk due to forced selling from institutional holders” (15). Advice for investors who wish to preempt this potential risk include converting their ADRs into Hong Kong shares or pursuing dual listings in Hong Kong and the US, which would provide a fallback option in case of delisting from US exchanges (16).

The trade war has also created potentially serious implications for the Swiss franc. As the dollar continues to be weakened, investors are flocking to the Swiss franc as a safe haven, putting pressure on Switzerland’s trade, particularly for export-oriented companies reliant on US markets. Additionally, the Swiss National Bank, which holds a significant amount of US government bonds, is facing a dilemma as it cannot easily defend the franc's appreciation without risking being labeled a currency manipulator by the Trump administration. If the US economy and the dollar weaken further, Switzerland would be wise to diversify into more fertile markets, such as emerging Asia (17).

Ultimately, however, despite whatever the US does or doesn’t do, the fact remains that the over-leveraged global financial system is approaching the end of its greater capital cycle, and a restructuring of the monetary system appears to be underway—and is likely unstoppable (18). Therefore, the US can only do so much to try to ensure its economy remains stable, but ultimately, the gun of a global monetary reset has long been locked and loaded, and any destabilizing event would have set off the trigger (19).

References: (1) First-quarter GDP growth will be just 0.3% as tariffs stoke stagflation conditions, says CNBC survey

(2) 'Depression' Narrative Bust: Atlanta Fed 'Adjusts' Away GDP Plunge Forecast

(3) The Employment Situation March 2025

(4) Consumer Price Index Summary

(5) Fed holds interest rates steady, still sees two cuts coming this year

(6) The End of Illusion

(7) "It's Main Street's Turn To Restore The American Dream" - US Treasury Secretary Warns Wall Street

(8) Foreign demand for US assets might not be dead yet

(9) Rebalancing the world economy: Right idea but wrong approach

(10) 'This Is Not About Tariffs': Ray Dalio Fears "Something Worse Than A Recession"

(11) The trade surplus that Trump never mentions

(12) Is Capital Fleeing the United States?

(13) Reciprocity, Retaliation, & A Tariff-Induced Recession?

(14) US Treasury secretary calls China’s trade escalation ‘unfortunate’

(15) Delisting Chinese Stocks Is a Real Possibility for Trump. There’s a Lot at Stake.

(16) "The Nuclear Option": Here's What Will Happen When Trump Orders Delisting Of Chinese Stocks

(17) Dollar-Crash bringt Schweizer Nationalbank in die Bredouille

(18) The Imminent Restructuring of the Monetary System

(19) The Big Short & The Bigger Long