There are … four? problems here.
First: If you want it to be 32x32 on the screen, anything above 64x64 is probably not needed, and anything above 128x128 is showing no respect for the user’s RAM and download resources.
Second: If the image is supposed to be exactly square, then the input image should also be exactly square. Open it up in Photoshop and resize canvas to make it so. Else, you will get jaggies from the stretching that happens.
Third: UI widget textures should typically be set to the texture quality “User Interface (RGBA)” which is not the default when importing; compression artifacts are frequently quite noticeable in UI assets.
Fourth: You should make sure to calculate MIP maps on import, if you haven’t. “No MIP maps” is typically bad advice. If you find that you get too blurry images, you can bump the anisotropy up in your sampler/shader settings, and maybe add a little bit of MIP bias (-0.5 or so) but generally that’s not needed.
Fifth (bonus!): If you’re going to rescale an image, it’s typically a good idea to use a Scale wrapper around it, that makes sure it’s scaled uniformly, either to fit or fill (depending on whether you want empty or clipping when the container aspect is off.)