The US economy slowed down in the first quarter of 2025. New GDP data shows the economy shrank at an annual rate of 0.3%. One reason for this drop was businesses rushing to buy goods before President Trump’s new tariff rules took effect, which pushed up imports. 

Another reason was lower government spending. These tariffs are likely to push prices up in the US, while lowering them in other countries. Some economic indicators are showing signs of a possible recession, although markets are still only expecting a mild slowdown, which now seems likely due to recent policy changes.

In response to its own challenges, China announced new measures to support its economy. These include cutting interest rates and injecting more money into the system. The Chinese economy has been struggling due to a major property market downturn and now the trade conflict with the US. 

Factory activity in China fell sharply in April, mainly because companies rushed orders to beat the new tariffs. Even though trade tensions have created problems, hopes for a deal between the US and China have improved market sentiment. 

However, the deal still includes 30% tariffs on Chinese goods, which may continue to slow trade. A new trade announcement between the US and UK also disappointed markets, as the US kept a 10% tariff on UK goods, up from the previous 3.4%. Talks with the EU haven’t even started yet.

In Australia, the recent election didn’t have much impact on financial markets. We’re waiting for GDP figures, which are expected to show the economy is still weak, especially with low consumer spending. The Reserve Bank of Australia has cut interest rates, which should help support slow but steady growth.

Overall, financial markets are facing a lot of uncertainty, shown by increased ups and downs in prices. Ongoing inflation concerns, strict policies, and trade issues are still affecting markets. 

What’s clear is that the US needs trade with China just as much as China needs the US. In the Australian share market, many companies gave cautious outlooks in their recent reports, and full-year forecasts were lowered. This suggests that overall earnings growth is slowing, and expectations for the rest of this year and possibly next year are now more modest.