Following the release of concerning economic data, Donald Trump urged Americans to remain patient. The US economy unexpectedly contracted during the first quarter of the year, sparking widespread concern regarding the president's trade policies.
The Commerce Department's Bureau of Economic Analysis reported a 0.3 percent annualized decrease in Gross Domestic Product (GDP) between January and March. This figure was lower than the 0.3 percent growth that economists had predicted. The economic downturn occurred amidst significant uncertainty surrounding the impact of the Trump administration's extensive tariffs.
This recent data represents the American economy's poorest performance in three years, a stark contrast to the 2.4 percent annualized growth seen in the final quarter of 2024. Trump, responding on social media, attributed the economic downturn to his predecessor, Joe Biden, and called for patience.
Later, at a cabinet meeting, Trump reiterated his blame on Biden for the GDP decline. He asserted that his tariffs were attracting manufacturers, including semiconductor chip makers, to invest billions in the US. He also claimed that China was significantly affected by the 145 percent tariffs on its imports.
Trump expressed hope for a future trade agreement with China, while also highlighting intellectual property as a key point of contention. Imports surged by 41 percent between January and March, the highest rate since 2020, which reduced first-quarter growth by 5 percent. Increased tariffs negatively impact GDP, which measures domestic growth.
The economic figures triggered a sell-off on Wall Street, with the S&P 500 experiencing a nearly 2 percent drop in early trading. These figures are likely to exacerbate existing concerns about the state of the world's largest economy. Consumer confidence was already near five-year lows, and business sentiment had declined.
Airlines have withdrawn their 2025 financial forecasts, citing uncertainty about non-essential travel spending due to tariffs. Economists have warned that these tariffs will increase costs for both businesses and households. A 10 percent tariff is being applied to imports from most countries, while a 145 percent tariff on Chinese goods remains in effect.
The president maintained that his import levies would bring manufacturing back to the United States. Critics of Trump were quick to place blame on the president. Senator Elizabeth Warren stated that Trump's tariffs were shrinking the economy.
Companies had been rushing to import foreign-made goods into the US before the tariffs were imposed. High Frequency Economics chief economist Carl Weinberg predicted that the economy would worsen in the second half of the year. He cited uncertainty and tariffs, which act as a tax on imports, as factors that would likely push GDP growth into negative territory by the end of the year.
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