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:
"U.S. Economy Faces Significant Slowdown Amid Tariff Policy Uncertainty"
CNN
7.2
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 largely attributed to President Donald Trump's aggressive tariff policies, which have created uncertainty among consumers and businesses. Economists project that the gross domestic product (GDP) grew at an annualized rate of only 0.8% during this period, while the Federal Reserve Bank of Atlanta predicts a more severe decline of 2.5%. Factors contributing to this economic deceleration include a spike in imports as businesses and consumers rushed to make purchases before tariffs took effect, as well as weaker consumer spending early in the quarter due to unusually harsh winter weather. Nathan Sheets, Citigroup's global chief economist, noted that the economic landscape is clouded by concerns over the potential impacts of these tariffs on the economy and market stability.
Additionally, the trade deficit has worsened, contradicting Trump's assertion that tariffs would rectify trade imbalances. The data indicates that the trade deficit reached $130.6 billion in January, marking the highest level recorded since 1994. Despite a slight decrease to $122.7 billion in February, this figure remains alarmingly high. Economists have highlighted that the expansion of the trade deficit is largely due to increased imports of industrial supplies and consumer goods. Consumer spending, a key driver of the economy, showed signs of weakness at the beginning of the year, with a notable decline in retail sales. Although there was a surge in spending in March as consumers sought to beat impending tariffs, analysts caution that this uptick may not be sustainable. Business sentiment has also been affected, with surveys indicating a sense of unease regarding Trump's tariff strategy, although business investment has shown some resilience in the face of these challenges.
TruthLens AI Analysis
The article sheds light on the recent economic performance of the United States, indicating a potential downturn that could mark the worst quarter since the Covid-19 pandemic. It attributes this decline to President Trump's abrupt policy changes, particularly concerning tariffs, which have led to uncertainty among consumers and businesses. The upcoming GDP report is anticipated to provide a clearer picture of the economic landscape.
Economic Concerns and Uncertainty
The article highlights the anxiety surrounding the economic implications of new tariffs imposed by the Trump administration. The suggested GDP growth rate of 0.8% is particularly concerning, as it signals a slowdown compared to previous quarters. Additionally, the predicted drop of 2.5% by the Federal Reserve Bank of Atlanta underscores the severity of the situation, indicating that the economy is grappling with the ramifications of aggressive tariff policies.
Impact of Tariffs on Trade Deficit
The narrative emphasizes the paradox of Trump's tariff policies, which were intended to reduce the trade deficit but have seemingly exacerbated it. This contradiction raises questions about the effectiveness of such measures and the potential long-term implications for the economy. As businesses adjust to new tariffs, the article suggests that the increased imports have negatively affected GDP, showcasing the complexities of international trade dynamics.
Consumer Behavior and Spending
Weather-related factors are also cited as contributing to decreased spending in early 2023. The harsh winter conditions may have further hindered consumer activity, indicating that external factors can significantly influence economic performance. This point adds depth to the analysis by acknowledging that economic trends are not solely driven by policy changes but are also affected by environmental circumstances.
Perception Management
The framing of the article appears to aim for a specific public perception regarding the effectiveness of Trump's economic policies. By emphasizing negative economic indicators and the resulting uncertainties, the article may intend to evoke concern among readers about the current administration's handling of economic issues.
Comparative Context
In relation to other news stories, this article aligns with a broader narrative of skepticism surrounding Trump's governance, particularly in economic matters. By highlighting the potential economic downturn, it contributes to an ongoing discourse questioning the efficacy of his policies.
Potential Economic Scenarios
The concerns raised in the article could lead to a range of future scenarios, including decreased consumer confidence and reduced investments from businesses wary of ongoing tariff implications. This could further exacerbate economic stagnation and potentially lead to a recession if trends continue.
Audience Targeting
The article likely appeals to audiences who are critical of the current administration, including economists, business professionals, and general readers concerned about economic stability. It aims to inform these groups about the complexities of economic performance amid policy shifts.
Market Reactions
The content may influence stock market behavior, as investors react to economic forecasts. Industries heavily impacted by tariffs, such as manufacturing and imports, could see fluctuations in stock prices based on the sentiment conveyed in this report.
Global Implications
From a geopolitical perspective, the economic performance of the U.S. holds significant weight. A downturn could affect global markets, trade relations, and the U.S.'s standing in international economic discussions, particularly as other nations observe how domestic policies shape economic outcomes.
Use of AI in Reporting
While the article's content suggests a human touch in crafting the narrative, AI tools may have been utilized for data analysis or trend forecasting, particularly in assembling economic statistics or interpreting data. However, the emotive language and framing imply a more traditional journalistic approach rather than reliance on AI-generated content.
In summary, the article presents a concerning view of the U.S. economy, potentially reflecting an agenda to critique Trump's economic policies. The portrayal of economic challenges may resonate with audiences seeking accountability in governance, while also serving as a catalyst for broader economic discussions.