The U.S. economy is showing signs of strain and now President Donald Trump faces a defining moment of his second presidency. With GDP contraction, legislative hurdles, and slipping poll numbers, May 2025 becomes the most pivotal month in his political career.
Here’s why…
GDP Shrinks: Recession Fears Resurface
The U.S. economy contracted by 0.8% in the first quarter of 2025, marking the first quarterly decline since 2022. High interest rates and persistent inflationary pressures played central roles in this downturn. Consumer spending dropped, particularly in durable goods, and business investments weakened. A growing trade deficit further suppressed growth, as exports fell and imports rose.
The Federal Reserve's sustained policy of elevated interest rates is now drawing criticism for dampening demand. Although the labor market remains resilient, economists caution that continued contraction could signify a broader slowdown. This economic report has escalated speculation that the Fed might lower rates sooner than anticipated, raising broader concerns about the stability of the post-pandemic recovery.
The contraction is especially perilous for President Trump, whose economic stewardship now faces increased scrutiny. With only one more quarter of negative growth needed to officially declare a recession, Trump’s control over the economic narrative is under threat.
House Republicans Tackle Tax Reform Under Pressure
Efforts are underway in the House to reconcile deep internal divisions over a new tax bill, with a particular focus on modifying the cap on state and local tax (SALT) deductions. The $10,000 cap, imposed in 2017, disproportionately affects high-tax states such as New York and New Jersey. Moderates in these areas demand relief, while fiscal conservatives and budget hawks push back against lifting the cap.
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