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 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 2.5%, 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 few months to address a massive trade deficit that Trump has referred to as a “national emergency” — and the deficit has actually gotten 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 January, the trade deficit ballooned 34% to $130.6 billion, the largest on records going back to 1994. The deficit shrunk to $122.7 billion in February, according to the latest data, but that was still the second-biggest trade deficit ever. (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 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.”
The US economy likely just had its worst quarter since Covid
TruthLens AI Suggested Headline:
"US Economy Faces Significant Slowdown Amid Trump's Tariff Policies"
CNN
7.2
TruthLens AI Summary
The United States economy is projected to have experienced its most significant slowdown since the onset of the Covid-19 pandemic, largely attributed to President Donald Trump's abrupt policy changes, particularly the imposition of extensive tariffs. The Commerce Department is expected to release its preliminary estimate of the first-quarter gross domestic product (GDP), which is anticipated to show an annualized growth rate of merely 0.8%, the lowest since the second quarter of 2022. However, the Federal Reserve Bank of Atlanta has forecasted a more drastic decline of 2.5%, marking a potential low not seen since mid-2020. Several factors contributed to this economic deceleration, including an uptick in imports as businesses and consumers rushed to acquire products before tariffs took effect, a slowdown in consumer spending due to severe winter weather, and hesitance among companies to invest amidst uncertainty regarding the administration's trade policies. Economists suggest that while there are fluctuations in the data due to seasonal factors, the overarching concern about the tariffs' impact on economic performance is palpable among consumers and market participants alike.
The tariff measures introduced by the Trump administration have exacerbated the trade deficit, which has been a point of contention for the administration. In the first 100 days of Trump's second term, the trade deficit reportedly worsened, reaching $130.6 billion in January, a 34% increase compared to previous records. Although the deficit narrowed to $122.7 billion in February, it remained historically high. The tariffs, which include significant levies on imports from various countries, have prompted retaliatory actions from China and responses from the European Union and Canada. Consumer spending, which is vital to the economy, showed signs of weakness in the early part of the quarter due to adverse weather conditions, with retail sales declining in January. A brief surge in March, attributed to consumers rushing to purchase goods before tariffs were enacted, is expected to be temporary. Meanwhile, business sentiment remains cautious, with mixed signals in investment trends, highlighting a complex economic landscape as the administration's trade policies continue to unfold.
TruthLens AI Analysis
The news piece highlights a significant downturn in the US economy, potentially marking its worst quarter since the onset of the Covid-19 pandemic. This downturn is attributed to abrupt policy changes under President Trump, particularly concerning tariffs, which have caused consumer and business uncertainty. The article aims to illuminate the economic implications of these policies and the public's response to them.
Economic Impact of Tariffs
The article suggests that the tariffs imposed by the Trump administration have led to a greater trade deficit, contrary to the intended goal of reducing it. This raises concerns about the effectiveness of these tariffs and highlights how a significant portion of the economy is reacting negatively to increased import costs. The analysis by economists indicates that consumer behavior is being affected by these policies, with spending declining in the face of uncertainty.
Public Perception and Sentiment
The tone of the article appears to foster a sense of concern among the public about the state of the economy. By emphasizing the potential for the worst GDP growth since mid-2020, it aims to create awareness of the economic challenges that may arise from current government policies. The mention of consumer anxiety reflects a broader sentiment that may influence public opinion against the administration's economic strategies.
Potential Concealment of Other Issues
While the article focuses on the economic downturn, it may overshadow other underlying issues, such as the long-term implications of trade policies and their impact on international relations. By concentrating on immediate economic effects, there might be an intention to divert attention from the broader context of how these tariffs affect global trade dynamics.
Manipulative Aspects
The article's manipulation potential can be considered moderate. By portraying a bleak economic outlook associated with Trump's policies, it may bias public perception against the administration. The language used, emphasizing "worst quarter" and "economic concern," suggests a deliberate choice to evoke anxiety among readers over a specific economic narrative.
Comparative Context
When compared to other economic news, this article fits within a broader trend of critical reporting on the Trump administration's policies. Similar articles may highlight the negative effects of tariffs and trade wars, indicating a possible coordinated effort to scrutinize these policies. The publication's historical stance towards the administration may suggest a consistent narrative that critiques its economic approach.
Broader Implications
The potential scenarios following this news could include increased public pressure on the administration to reconsider its tariff policies, which could lead to shifts in economic strategy. This might also result in changes in investment patterns as businesses reassess their strategies in light of economic uncertainty. The overall impact on the stock market could be significant, particularly for companies heavily reliant on imports or those directly affected by tariffs.
Target Audience
This news likely resonates with communities concerned about economic stability, particularly those negatively affected by trade policies. It may appeal to the general public, economists, and political analysts who are wary of the current administration's economic decisions.
Market Response
The news can have a direct impact on stock markets, particularly affecting sectors such as manufacturing and commodities, where tariff policies play a crucial role. Companies that rely heavily on imported materials may see stock price fluctuations as investors react to the economic forecast.
In summary, the article reflects critical economic analysis while potentially projecting a specific narrative regarding the Trump administration's policies. The emphasis on GDP performance and consumer behavior creates a platform for public discourse on economic management, highlighting the dynamic interplay between policy and market sentiment.