The US economy unexpectedly contracted in the first three months of the year on an import surge triggered by Donald Trump’s tariff plans, although the president pinned the blame squarely on his predecessor.
The sharp increase in imports was a reflection of businesses and consumers stockpiling foreign goods to get ahead of Trump’s sweeping trade levies, which went into effect earlier this month.
All three major Wall Street indices fell on the economic news, with the Nasdaq sliding more than two per cent before paring some losses in morning trading, while oil prices extended their losses.
At a cabinet meeting in Washington, Trump insisted the growth downturn was the legacy of former President Joe Biden’s policies.
“That’s Biden, that’s not Trump,” he said.
Striking a more positive tone, he highlighted the “whopping” 22 per cent rise in gross domestic investment during the first quarter.
Annual economic growth stayed above two per cent in every year of Biden’s presidency, reaching 2.8 per cent in 2024.
The gross domestic product (GDP) of the world’s largest economy decreased at an annual rate of 0.3 per cent in the first quarter, after growing 2.4 per cent in the final months of 2024, according to Wednesday’s first estimate from the US Commerce Department.
This was sharply below the market consensus estimate of 0.4 per cent growth, according to Briefing.com, and marked the first quarterly contraction since 2022.
The Commerce Department said in a statement that the contraction was in large part down to an “upturn in imports,” aided by a decline in consumer and government spending.
“A BLARING WARNING”
In a statement published later Wednesday, the White House called GDP a “backward-looking indicator.”
“It’s no surprise the leftovers of Biden’s economic disaster have been a drag on economic growth,” White House Press Secretary Karoline Leavitt said.
“But the underlying numbers tell the real story of the strong momentum President Trump is delivering.”
The GDP figures were published on the 101st day since Trump returned to the White House on Jan 20, along with fresh data showing a slowdown in the US Federal Reserve’s favoured inflation gauge last month.
Since returning to Washington, the president has announced several rounds of tariffs, laying out plans in March to impose sweeping levies on top trading partners from early April in a bid to reshape US trade relations.
The introduction of tariffs sparked a selloff in financial markets, sending volatility surging to levels not seen since the COVID-19 pandemic.
“Today’s GDP number shows Donald Trump is running America the same way he ran his business – straight into the ground,” top Senate Democrat Chuck Schumer said in a statement.
“This decline in GDP is a blaring warning to everyone that Donald Trump and Congressional Republicans’ failed MAGA experiment is killing our economy,” he added.
“GREATER RISK OF RECESSION”
Following the dramatic market movements in early April, the Trump administration announced a 90-day pause to the higher tariffs for dozens of countries to allow for trade talks, while maintaining a baseline 10 per cent rate for most countries.
It also announced sector-specific measures on steel, aluminium and automobiles and parts not made in the United States, and new sweeping tariffs totalling 145 per cent on China.
Speaking at the cabinet meeting on Wednesday, Trump said China was getting “hammered” by the tariffs, and said he still hoped to make a deal with Beijing.
“We’re talking to China, but their factories are closing all over China because we’re not taking their product,” he said. “We don’t want their product unless they’re going to be fair with us.”
