The US economy just had its worst quarter since 2022 as President Donald Trump’s significant policy changes unnerved consumers and businesses. Gross domestic product, which measures all the goods and services produced in the economy, registered at an annualized rate of -0.3% in the first quarter, the Commerce Department said Wednesday. That’s a sharp slowdown from the fourth quarter’s 2.4% rate, and much worse than the 0.8% rate economists projected. GDP is adjusted for seasonal swings and inflation. US stocks dropped after the GDP report was released. The Trump administration has been on a chaotic tariff spree over the past several months, escalating trade tensions with China and unsettling Americans. Most economists say Trump’s monumental bid to reshape global trade is likely to send inflation climbing in the United States and even trigger a recession. The president, however, deflected blame from the weak figures reflected in the first economic report card of his second term. “Our Country will boom, but we have to get rid of the Biden ‘Overhang.’” he wrote Wednesday in a post on social media. “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!!!” During a Cabinet meeting Wednesday, Trump reiterated that stance: “That’s Biden, that’s not Trump.” The economy’s decline in the beginning of the year was driven by a wider trade deficit — a result of Americans front-running purchases to beat Trump’s tariffs — and cutbacks in government spending, according to a release. Imports skyrocketed from -1.9% in the fourth quarter to 41.3% in the first three months of the year. Meanwhile, exports registered at a 1.8% rate. When imports exceed exports, that subtracts from GDP and that was by far the biggest drag on growth in the first quarter. The difference between imports and exports subtracted from GDP by the most on records going back to 1947. Trump’s top trade adviser, Peter Navarro, called the GDP report “the best negative print I have ever seen in my life.” “The markets need to look beneath the surface,” Navarro said Wednesday in a CNBC interview, pointing to the sharp increase in domestic investment last quarter. However, much of that came from businesses increasing their inventories ahead of tariffs, the Commerce Department said. Details from the report There were several signs of weakness in the first GDP report of Trump’s second term, but it wasn’t all doom and gloom. Consumer spending, which powers about 70% of the US economy, slowed sharply in the first quarter to a 1.8% rate, down considerably from 4% in the prior three-month period. That slowdown was largely due to Americans cutting their spending on goods, and was the weakest rate since mid-2023. Government spending also weighed on the economy, with federal outlays dropping to -5.1% from 4% during the same period. Meanwhile, businesses actually stepped up their spending, likely to get ahead of any expected price increases stemming from Trump’s tariffs. Business investment in the first quarter expanded at a 9.8% rate, up sharply from -3% in the fourth quarter. Gross private domestic investment was 21.9% in the January-through-March period, the highest rate since late 2021. Stephen Miran, chair of the White House’s Council of Economic Advisers, told CNN’s Pamela Brown that the uptick in business investment is “not what firms do when they’re concerned about the economic outlook.” In a shred of goods news, final sales to private domestic purchasers — a key gauge of underlying demand in the economy — accelerated to 3% in the first quarter from 2.9% in the fourth quarter. The White House pointed to that figure as a sign of “strong underlying economic momentum that occurred after President Trump’s inauguration.” “It’s no surprise the leftovers of Biden’s economic disaster have been a drag on economic growth, but the underlying numbers tell the real story of the strong momentum President Trump is delivering,” Trump’s press secretary, Karoline Leavitt, said in a statement. She added that economic developments over the past few months are “fueling an economic boom and setting the stage for unprecedented growth as President Trump ushers in the new Golden Age.” Wednesday’s report also showed that inflation took a sharper than expected upswing during the first quarter. The Personal Consumption Expenditures price index rose an estimated 3.6% for the quarter, up from 2.4% during the fourth quarter, according to the report. Excluding food and energy prices, the core PCE index increased 3.5% versus 2.6% the quarter before. We can’t call it a recession yet While the latest GDP report points to a much weaker economy compared to last year, that doesn’t necessarily mean Americans are in the throes of a recession just yet. A recession is technically defined as a broad-based contraction in the economy — encompassing the labor market, consumer spending, industrial activity and business investment — that lasts for more than a few months. And even though it may feel like there is a recession, according to polls and surveys, the economy remains in good shape on a few important fronts. Unemployment remains relatively low — 4.2% as of March — businesses are continuing to invest in their operations and consumers haven’t retreated with their spending in any meaningful way just yet, government data shows. Still, the economy can quickly take a turn for the worse, especially if Trump ups the ante on his tariff blitz. “I don’t think we can call a recession from this data right now but it is a sign that we’re on this razor-thin edge where the longer the tariffs remain in place the more likely we are headed for an economic downturn,” Gregory Daco, chief economist at Ernst & Young, told CNN’s Matt Egan. A separate report released Wednesday showed a precipitous drop-off in hiring by businesses in the US private sector, which doesn’t bode well for economic growth in the future. Employers added just 62,000 jobs in April, according to payroll company ADP’s latest monthly report released Wednesday morning. That’s well below the 147,000 jobs added in March. “Unease is the word of the day. Employers are trying to reconcile policy and consumer uncertainty with a run of mostly positive economic data,” Nela Richardson, chief economist at ADP, said in a statement. “It can be difficult to make hiring decisions in such an environment.” A rule of thumb for defining a recession is two consecutive quarters of negative GDP, which hasn’t happened yet. The National Bureau of Economic Research is the official recession arbiter, though the group’s call can come many months after a recession has officially started. The last time the US economy was in a recession was in 2020, which lasted just two months and was spurred by the Covid-19 pandemic. Before that, it was the Great Recession, which lasted from December 2007 through June 2009 and was the most severe economic downturn since the Great Depression.
US economy goes into reverse from Trump’s abrupt policy shifts
TruthLens AI Suggested Headline:
"US Economy Contracts in First Quarter Amidst Policy Uncertainty"
CNN
6.2
TruthLens AI Summary
The US economy experienced a significant downturn in the first quarter of the year, marking its worst performance since 2022, primarily attributed to President Donald Trump's abrupt policy changes that have created uncertainty among consumers and businesses. According to the Commerce Department, the Gross Domestic Product (GDP) contracted at an annualized rate of -0.3%, a stark decline from the previous quarter's growth of 2.4% and notably worse than the 0.8% growth projected by economists. This contraction is largely linked to the administration's aggressive tariff policies, particularly towards China, which have escalated trade tensions and led to increased imports. The report also highlighted that the widening trade deficit, driven by Americans rushing to make purchases before tariffs took effect, was the primary factor negatively impacting GDP. Imports surged dramatically, while exports saw only modest growth, resulting in the largest negative contribution to GDP from the trade balance on record since 1947.
Despite the gloomy overall figures, there were some signs of resilience within the economy. Consumer spending, which accounts for around 70% of the economy, slowed significantly, with growth dropping to 1.8% from 4% in the preceding quarter. Government spending also decreased sharply. Conversely, business investment rose substantially, indicating that companies are preparing for anticipated price hikes due to tariffs. The report noted a notable increase in private domestic investment, reaching its highest rate since late 2021. While some economists caution against declaring a recession based solely on the current data, they express concern that prolonged tariff policies could lead to an economic downturn. The job market showed signs of weakness as well, with a significant drop in hiring reported by businesses, further adding to the uncertainty surrounding economic growth. The situation remains delicate, and while the economy is not yet in recession, experts warn that conditions could deteriorate if the current policies persist.
TruthLens AI Analysis
The article presents an analysis of the recent downturn in the U.S. economy, attributing the decline to President Donald Trump's policy changes. The report indicates that the economy registered a negative growth rate of -0.3% in the first quarter, contrasting sharply with previous growth rates and significantly below economists' expectations. This situation is framed within the context of Trump's trade policies, particularly the tariffs imposed on imports, which have reportedly unsettled both consumers and businesses.
Economic Impact of Policy Changes
The article emphasizes that the economic decline can be linked to Trump's chaotic tariff policies, which have led to increased trade tensions, especially with China. The widening trade deficit is highlighted as a primary factor contributing to the negative GDP growth, with imports surging significantly while exports remained stagnant. This imbalance has historically been a major drag on the economy, as indicated by the data going back to 1947.
Public Perception and Political Narrative
Trump's response to the dismal economic figures aims to deflect blame away from his administration. He attributes the economic issues to President Biden's alleged policies, portraying a narrative that suggests the current problems are a continuation of previous administrations' failures rather than the consequences of his own policies. This strategy seeks to maintain his political base by framing the situation in a way that absolves him of responsibility.
Potential Manipulation and Public Sentiment
The language used in the article, particularly in Trump's comments, suggests an attempt to manipulate public sentiment. By urging patience and promising a future economic boom, the article implies a strategy to keep his supporters hopeful despite current downturns. This could be seen as a form of psychological manipulation, where the focus shifts from immediate negative outcomes to a promised future success.
Comparative Analysis with Other Reports
When compared to other economic reports around the same time, this article aligns with a broader narrative of uncertainty in the U.S. economy, particularly concerning trade policies. It indicates a potential connection to wider economic issues, such as inflation and recession risks, which have been under discussion in various financial analyses.
Community Response and Target Audience
The article seems to resonate more with communities that support Trump, particularly those who are concerned about trade and economic stability. It likely seeks to engage individuals who feel strongly about American manufacturing and trade policies, thereby reinforcing existing beliefs within this demographic.
Impact on Markets and Future Scenarios
The report's implications for the stock market are significant, as evidenced by the immediate drop in U.S. stocks following the GDP announcement. Investors typically react negatively to signs of economic instability, which could lead to broader market fluctuations. Companies affected by tariffs and trade policies, particularly in manufacturing and technology sectors, may see more pronounced volatility.
Global Power Dynamics
From a global perspective, the article reflects ongoing tensions in international trade relations, particularly between the U.S. and China. These developments could have far-reaching implications for global economic stability and the balance of power in trade negotiations, highlighting the interconnectedness of domestic policy and international relations.
There is no clear indication that artificial intelligence was used in crafting this article; however, the structured way in which economic data and political narratives are presented suggests a carefully curated approach to influence public perception.
In conclusion, the article serves to convey a narrative that seeks to frame the current economic challenges as a result of past policies while encouraging a sense of hope for future recovery. This aligns with a broader political strategy aimed at maintaining support among Trump's base while deflecting blame for current economic struggles.