President Donald Trump’s major, abrupt policy shifts likely slowed the US economy sharply in the beginning of the year — for the worst quarter perhaps since the Covid-19 pandemic — as consumers and businesses fretted about massive new tariffs. The Commerce Department is set to release its initial estimate of first-quarter gross domestic product, the broadest measure of economic output, on Wednesday at 8:30 am ET. It will give the clearest picture yet of how the US economy is responding to Trump’s sweeping economic agenda, just one day after the administration’s 100th day in power. Economists estimate that GDP expanded at an annualized rate of 0.8% in the first quarter, adjusting for inflation and seasonal swings, according to financial data firm FactSet, which would be the weakest rate since the second quarter of 2022. The Federal Reserve Bank of Atlanta, meanwhile, is forecasting a sharp decline of 2.7%, which would mark the worst quarter since mid-2020. GDP likely slowed due to higher imports as American consumers and businesses rushed to beat Trump’s tariffs (when imports exceed exports, that subtracts from GDP); weaker spending early in the quarter as unusually harsh cold weather kept shoppers hunkered down; and companies pausing investments over uncertainty stemming from Trump’s policies, among other factors. “There’s a lot of noise in the data from storms, people front-loading and some payback for the strength in the fourth quarter,” Nathan Sheets, global chief economists at Citigroup, told CNN. “But you’ve got this economic concern from how tariffs are going to affect the economy and markets that people are really struggling with.” A higher trade deficit The Trump administration has been on a chaotic tariff spree over the past couple of months to address a massive trade deficit that Trump has referred to as a “national emergency” — and that deficit has actually become worse in recent months. So far, Trump has levied 25% tariffs on aluminum and steel; 25% tariffs on goods from Mexico and Canada that aren’t compliant with a free-trade agreement among the countries; a staggering 145% duty on Chinese imports; a 25% tariff on cars, with separate tariffs on auto parts coming at a later date; and a 10% baseline tariffs on all US imports. A massive tariff hike on dozens of countries briefly went into effect on April 9, though Trump swiftly delayed that hike that same day until July. He also introduced temporary exemptions for some electronic goods, and he has said separate tariffs are likely coming down the pike on semiconductors, pharmaceuticals, copper and timber. China has retaliated at every juncture, jacking up its tariffs on US imports to a bruising 125%, though Trump has hinted at a potential U-turn in his trade spat with the world’s second largest economy. The European Union and Canada have also vowed to fight back against the US tariffs. America’s trade deficit, meanwhile, got worse in the first 100 days of Trump’s second term, according to government data. In March, the trade deficit jumped by $14 billion to a record $162 billion, according to advance trade data published by the Census Bureau on Tuesday. That comes after a January deficit that ballooned 34% to $130.6 billion and a $122.7 billion total in February, according to the latest data. (Trump took office on January 20, so the data for that month also reflects the end of the Biden administration.) “If you look at what drove the widening in the trade deficit, it was mostly industrial supplies and consumer goods, durable items that aren’t perishable,” said Nicole Cervi, an economist at Wells Fargo. How consumers and businesses spent American consumers and businesses overwhelmingly power the US economy with their spending, and economists say there were signs that spending was sputtering in the first quarter. Trump’s unpredictable trade war has significantly weighed on America’s economic mood in recent months, according to various sentiment surveys, jeopardizing consumer demand moving forward. For consumers, much of the first-quarter spending weakness came near the start of the year, mostly due to unusually harsh cold weather and to wildfires in Los Angeles, according to economists. In January, spending on goods and services declined 0.3%, while retail sales saw an even steeper decline of 0.9%, according to Commerce Department data. Spending made a weaker-than-expected recovery in February. Then, in March, retail sales skyrocketed at the strongest monthly pace in more than two years as Americans rushed to get ahead of Trump’s tariffs, driven mostly by spending on cars and auto parts. However, that boost will likely prove temporary. On the business side, recent surveys from the US-based nonprofit Institute for Supply Management have similarly shown that businesses are feeling uneasy over Trump’s policies in both the manufacturing and services sectors. That skittishness hasn’t translated into weaker business spending yet. New orders for non-defense capital goods excluding aircraft — a closely watched proxy for business investment — declined 0.3% in February, then rose by a tepid 0.1% in March. “There was a hint of softness” in those numbers, wrote Richard de Chazal, macro analyst at finance firm William Blair. Even though consumers and businesses were worried about Trump’s tariffs, business investment in March “held up well.” This story is developing and will be updated.
The US economy likely just had its worst quarter since Covid
TruthLens AI Suggested Headline:
"U.S. Economy Faces Potential Slowdown as Tariffs and Policy Changes Create Uncertainty"
CNN
6.0
TruthLens AI Summary
The U.S. economy appears to have experienced a significant slowdown in the first quarter of the year, potentially marking its worst performance since the onset of the COVID-19 pandemic. This downturn is attributed to several factors, including President Donald Trump's abrupt policy changes, particularly the introduction of extensive tariffs that have created uncertainty among consumers and businesses. The Commerce Department is expected to release its preliminary estimate of the gross domestic product (GDP), with economists forecasting an annualized growth rate of only 0.8%. This would represent the weakest growth since the second quarter of 2022. Conversely, the Federal Reserve Bank of Atlanta predicts an even sharper decline of 2.7%, which would be the most substantial drop since mid-2020. The slowdown can be linked to increased imports as businesses and consumers rushed to purchase goods before tariffs took effect, along with diminished consumer spending due to harsh winter weather and hesitancy in business investment stemming from the unpredictable trade policies of the Trump administration.
Additionally, the trade deficit has widened significantly during Trump's second term, exacerbated by the tariffs imposed on imports from various countries, including China, Mexico, and Canada. The trade deficit reached a record $162 billion in March, following a substantial increase in previous months. Economists have noted that the broader economic sentiment has been negatively affected by the uncertainty surrounding these tariffs, which have led to fluctuating consumer spending patterns. While retail sales saw a temporary surge in March as consumers attempted to preemptively buy goods before tariffs were fully enacted, this uptick is not expected to be sustainable. Furthermore, business investment showed signs of weakness, indicated by a slight decline in new orders for capital goods. Overall, the combination of increased tariffs, a growing trade deficit, and cautious consumer and business sentiment suggests that the U.S. economy is facing significant challenges moving forward, with the potential for further declines in economic performance as the effects of these policies continue to unfold.
TruthLens AI Analysis
The article presents a critical overview of the US economy's performance, particularly highlighting the potential for the worst economic quarter since the onset of the Covid-19 pandemic. It focuses on the impact of President Donald Trump’s policy changes, particularly the introduction of tariffs, which have led to increased uncertainty among consumers and businesses. The article’s timing, just after the administration's 100th day in office, suggests an intention to scrutinize the effectiveness of Trump's economic agenda.
Economic Concerns and Public Sentiment
The article aims to convey a sense of economic unease, emphasizing how recent tariff policies may have backfired, leading to a slower growth rate and a higher trade deficit. By detailing the anticipated GDP contraction, the piece seeks to create apprehension among readers regarding the overall economic climate. The use of phrases like “worst quarter” and references to past economic downturns, such as during the pandemic, is designed to evoke concern and skepticism about the current administration’s approach.
Potential Information Gaps
While the article raises valid points about tariffs and economic performance, it may downplay other contributing factors, such as global economic conditions, supply chain issues, and the lingering effects of the pandemic. By focusing predominantly on Trump's policies, it risks presenting a one-dimensional view of a complex economic situation. This could lead to a skewed understanding for the public, as it may not fully represent the broader context affecting the economy.
Manipulative Elements
The language employed in the article leans towards alarmism, which could be perceived as manipulative. The framing of economic data alongside political commentary may suggest a bias against Trump’s administration. By emphasizing negative outcomes without equally addressing any positive economic indicators, the article could be viewed as an attempt to influence public opinion against the current administration.
Comparative Context
In comparison to other reports on economic performance, this article stands out by specifically linking economic downturns to political decisions, rather than broader global trends. This connection may resonate more with audiences critical of Trump's policies, thereby reinforcing existing biases among those communities.
Impact on Markets and Investments
The article’s implications regarding a potential economic slowdown could influence market sentiment, particularly for sectors sensitive to trade policies and tariffs. Investors may react by reassessing their positions in stocks related to consumer goods, manufacturing, and international trade. The mention of a higher trade deficit might also signal concern among investors about future economic stability.
Global Power Dynamics
From a broader perspective, the article touches on issues of trade and tariffs that can influence the US's position in global markets. The ongoing trade tensions and their impact on economic performance could have ripple effects on international relations and economic partnerships, making this a relevant topic in discussions about global power dynamics.
Artificial Intelligence Considerations
There is no clear indication that artificial intelligence was used in the creation of this article. However, if AI were involved, it could have influenced the way data is presented, possibly emphasizing negative trends to align with certain narratives. Such manipulation could steer public perception in a particular direction, particularly through headline framing and the selection of data points highlighted.
In conclusion, the article provides a critical lens on the current state of the US economy, particularly in relation to recent policy changes. It emphasizes concerns about economic performance, which could shape public sentiment and market behavior. The potential for manipulation through selective reporting and alarmist language raises questions about the reliability of the information presented.