The Dilemma of the U.S. Economy Under Policy Pressure

The latest trade data released by the United States shows that the trade deficit in April 2025 significantly narrowed to $61.6 billion, the lowest since September 2023, and significantly lower than March's $138.3 billion.

Trump may be quite pleased with this data, seeing it as a victory since the tariff policy was launched in early April.

However, it should be noted that one important reason for the significant narrowing of the U.S. trade deficit is the significant decline in the value of U.S. imports of goods and services.

Data speaks!

In April 2025, U.S. imports fell 16.3% month-on-month to $351 billion.

It is well known that this gap is due to U.S. import companies stockpiling in advance in anticipation of Trump's tariff policy, which pushed up the March base. The decline in imports in April may indicate weak demand expectations. This is not good news for economic outlook.

From another set of data, the latest U.S. unemployment claims data also seems to confirm the recent weakening trend of the U.S. economy.

For the week ending May 31, U.S. initial jobless claims increased by 8,000 to 247,000, higher than the revised figure of 239,000 last week and the market expectation of 235,000. This is the highest since October 2024, reflecting signs of softening in the job market amid uncertainty created by Trump's tariffs and other policies.

In addition, the previously announced May 2025 manufacturing PMI was only 48.5 points, continuing to be below the 50-point threshold, indicating a contraction in economic activity, which is also not positive news.

More importantly, the annualized core inflation rate in the U.S. in April 2025 was 2.8%, unchanged from the previous month, but the impact of the tariff policy may only begin to be released gradually from April, which may cause the U.S. consumer price index to rise, meaning that its future inflation rate may be difficult to maintain at the 2% target level.

The market generally expects the Federal Reserve to keep interest rates unchanged at the June 18 meeting, but this meeting will be closely watched because as more economic data is released, the impact of Trump's policies on inflation and employment will gradually become apparent, providing more insights for the Fed's monetary policy.

Interestingly, the European Central Bank announced on the evening of June 5 that it would cut the three key interest rates in the eurozone by 25 basis points each, effective June 11. President Lagarde stated at the press conference that after this eighth rate cut of the year, the ECB's monetary policy cycle is about to end. This also intensifies Trump's pressure on Powell to cut rates.

Despite more rate cuts in the eurozone this year than the Federal Reserve, the euro remains strong against the dollar, staying above $1.143, reflecting a weak dollar. As shown in the chart below, the euro has been rising against the dollar since the beginning of the year. The dollar index has also been hovering below 99. The weak dollar may reflect concerns about the U.S. outlook, prompting capital to flee.

On June 5, the three major U.S. stock indexes weakened overall, with weak economic performance being an important reason dragging down the market, and individual stock performance also dragged down the index's trend.

Among them, the conflict between Musk and Trump intensified, dragging down$Tesla(TSLA.US) by 14.26%, with a market value evaporating by more than $150 billion overnight;

Broadcom, which announced better-than-expected second-quarter results,$Broadcom(AVGO.US) saw its stock price rise nearly 27% in the last 20 trading days, but adjusted more than 4% in after-hours trading after the earnings announcement;

The yoga apparel brand$Lululemon(LULU.US) reported first-quarter results that exceeded expectations, but Trump's tariff policy dragged down its outlook, with the stock price plummeting 22.37% in after-hours trading;

The first stablecoin stock to go public surged 168.48% on its first day, closing at $83.23, with a market value rising to $18.356 billion.

This market landscape of ice and fire is a true reflection of the U.S. economy in policy swings— the struggle between tech giants and traditional manufacturing, the supply chain restructuring triggered by trade barriers, and the impact of digital currencies on the sovereign currency system, with multiple contradictions continuously fermenting in capital pricing.

As the "world's richest man" Musk's defection intensifies, a series of chain reactions add more uncertainty variables to the U.S. economic predicament, making it increasingly mired in a confusing quagmire, with a worrying economic outlook.

Author: Mao Ting