Donald Trumppromised to usher in a new “golden age” for the US economy – one with lower prices, more jobs and greater wealth. This week, his first quarter report card came in, and the new age is off to a chaotic start.
Gross domestic product (GDP)shrankfor the first time in three years during the first quarter, abruptly turning negative after a spell of robust growth as trade distortions and weaker consumer spending dampened activity.
It took the US president all of 43 minutes to distance himself from the dismal reading, released on Wednesday morning.
“Our Country will boom, but we have to get rid of the Biden ‘Overhang’,” Trump wrote on Truth Social, his social media platform. “This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers, but when the boom begins, it will be like no other. BE PATIENT!!!”
By Trump’s telling, any bad numbers are the fault of Joe Biden – but this attribution does not extend to the good ones.
March’s strong jobs reportdemonstrated how “the private sector is roaring back under President Donald J. Trump”, according to a statement issued by the White House. “IT’S ALREADY WORKING,” the president declared the day it was published.
But April’s less buoyant jobs report,released on Friday, prompted a more tepid response. He wrote: “Just like I said, and we’re only in a TRANSITION STAGE, just getting started!!!”
So which is it? Is the “golden age” of America well under way? Or will it take a while?
Growth in the first three months of the year – no matter how much Trump wants to blame the 19 or so days he was not yet in office – was significantly challenged by the new administration’s plans to overhaul the world economy. US goods imports surged 41% as companies scrambled to pre-empt tariffs, while consumer spending on durable goods fell 3.4% assentiment came under pressure.
And the first quarter figures raised troubling questions about the second. Activity weakened largely as firms braced for the lion’s share of Trump’s tariffs, which he only unveiled in early April. How those firms, and their customers, ultimately respond to those tariffs –and the confusion around them– is widely expected to have a greater impact on growth.
Trump’serratic rolloutof 10% tariffs on goods from much of the world, and 145% on China, “have altered the picture dramatically” since the end of the first quarter, Oliver Allen, senior US economist at Pantheon Macroeconomics, observed. “Any support to spending from pre-tariff purchases will unwind soon now that substantial new tariffs have been imposed.
“Consumers’ spending will also be weighed down by a hit to confidence and real incomes from higher prices, while intense uncertainty will put the freeze on business investment, and exports – especially to China – will suffer.”
It is too soon to say whether tariffs, which the administration insists will revitalize theUS economy, will, in fact, set the stage for a recession: two consecutive quarters of contraction. On Trump’s watch, the landscape shifts rapidly from one day to the next, let alone during an entire quarter.
Trump is right, to a point: most of his tariffs are not to blame for the stunning reversal of growth in the first quarter. The US only hiked duties on China and imposed its blanket 10% levy on many other countries last month, days into the second quarter.
The foundations of a potential Trumpcession were not laid in the early months of the year by the tariffs themselves, but by his administration’s execution of them.
Fromrepeated jerks and joltsaround sweeping duties on Canada and Mexico to announcing “reciprocal” tariffs on dozens of nations which wereultimately imposed for less than a day, widespread confusion and uncertainty is now embedded into the world’s largest economy. Businesses inside it and outarenothappy.
Scott Bessent, Trump’s treasury secretary, has coined an interesting term for this playbook of threats, theatrics and social media broadsides. “President Trump creates what I would call ‘strategic uncertainty’ in the negotiations,” he told a press briefing on Tuesday. “As we start moving forward, announcing deals, then there will be certainty. But certainty is not necessarily a good thing in negotiating.”
However useful Trump and his officials find “strategic uncertainty” during trade negotiations, it has different consequences for those paying bills they wererepeatedly assuredwould swiftly fall, trying to grow a business in a market with leaders locked in a war of words with the White House, or planting a crop without knowing what the economic realities will be by the harvest.
Trump returned to office after winning the backing of rural and lower-income voters in significant numbers last November. He needs to preserve his base if Republicans are to maintain power in Washington during his second term.
Polling suggests these groups are concerned. A PBS News/NPR/Marist survey,published this week, found 48% of rural voters disapproved of Trump’s handling of the economy. The same was true for 57% of voters with a household income of less than $50,000.
As apprehension grows, the US president has sought to play down the risks. In one of the more peculiar moments in another bizarre week, he appeared to play down the threat of empty store shelves.
“Well, maybe the children will have two dolls instead of 30 dolls, y’know,” Trump said during a cabinet meeting on Wednesday. “And maybe the two dolls will cost a couple of bucks more than they would normally.”
China has “ships that are loaded up with stuff, much of which – not all of it, but much of which – we don’t need”, he continued.
It is typically up to the American consumer, not their president, to decide what they do and don’t need to buy. For a man whose fortune and image are built around conspicuous consumption, the comments seemed very off-brand. “Skimp on the Barbie” read the front page of the often Trump-friendly New York Post. It is still early days for Trump. But already the Biden “overhang” argument is wearing thin. It will be up to US voters, not their president, to deliver a verdict on his handling of the economy.