Official data show that the US economy shrank in the first three months of the year, causing fear of a recession in the US and a global economic slowdown.
After returning to the White House with the promise to “make America great again,” Donald Trump tried to blame Joe Biden for his appearance.
But economists said it was driven primarily by an unprecedented surge in imports, as consumers and businesses were supported by the president to impose a wave of controversial tariffs..
“This is not Trump’s stock market, it’s Biden’s stock market,” Trump wrote on social media, and the contraction “has nothing to do with tariffs. He just leaves us with a bad number, but when the boom starts, there’s no doubt else. Hold on!!!”
Democrats argued that the figure was a creepy verdict on the new administration’s handling of the economy. Senator Jeff Merkley said: “Trump has been in office for just 100 days, and costs, chaos and corruption are already rising. The economy is slowing, prices are rising, and middle-class families are in a pinch.”
Gross domestic product (GDP), an important measure of the US economy, signed 0.3% in the first quarter of the year, down from 2.4% growth in the last quarter of 2024. This contraction places the US on the brink of a technological recession, defined by two quarters of negative growth since its launch in 2022.
The decline in activity occurred amid a significant decline in consumer sentiment, falling 32% in April since the 1990 recession.
US stocks fell Wednesday morning, with the benchmark S&P 500 and technology-focused NASDAQ each falling 1.5%.
On the eve of Wednesday’s GDP report, Trump claimed at a Michigan rally that he built “the largest economy in our country’s history” during his first presidency, which ended in 2021, adding, “We did great things, and we’re doing better now.”
Quickly responding to data suggesting that this was not the case on Wednesday, Trump tried to assert that his predecessor was responsible.
“I didn’t take over until January 20th,” he wrote on the Truth Social Platform. “Taxes are kicking quickly, and businesses are beginning to move to the US in record numbers. Our country is booming, but Biden’s ‘Overhan needs to be removed.’
Trump threatened most of the first quarter, wiped out tariffs in Canada and Mexico, cleaned up competition, and targeted China with a higher export obligation.
A few days in the second quarter, which were not covered by today’s GDP reading, ordered even higher tariffs on many goods around the world before retrieving tariffs from all countries other than China. Currently, Trump is charging a 10% universal tariff on imports from around the world and a 145% tariff on imports from China.
Apparently responding to deep fluctuations in the US stock market, Trump shelved a wave of so-called “mutual tariffs” of up to 49% in certain countries and suspended for 90 days.
He provided some relief to US automakers who faced 25% tariffs on all car imports on Tuesday, signing an executive order that allows them to import auto parts but receive credit if they assemble US cars.
Last week, stocks came in the news that Trump said it would fall “significantly” as at least 145% tariffs on China (which already has some electronics exemptions) were negotiating a deal with Beijing. China has placed a 125% retaliatory tariff on American goods.
Some economists have pointed out that the decline in GDP over the past few months is largely due to the magnitude of imports American companies have purchased in anticipation of Trump’s tariffs. When GDP is calculated, imports are deducted and consumption from domestic production is taken into account.
The International Monetary Fund has downgraded its forecast for US growth this year due to tariffs, but some economists said the plunge in imports caused by border taxes from April could mean a rebound in GDP in the second quarter.
Elon Musk also played a role in the first quarter contraction. Federal spending of 5.1% has also complicated the data as the billionaire presidential adviser, the so-called “Ministry of Government Efficiency” (DOGE), has significantly reduced the administrative sector. Also, consumption slowed from 4% to 1.8% amidst severe weather and declining non-profit spending after election contributions were suspended.
New data released on Wednesday highlighted that new tariffs appear to be slowing trade significantly. In China, factories slowed down in April, and Beijing criticized the “sudden changes” in the world economy while US tariffs slamming exports. Exports to the US to Chinese e-commerce companies Temu and Shein have surpassed 65%, while exports to the EU have increased by 28%. Meanwhile, British sports and automaker Aston Martin said it would restrict exports to the US during Trump’s tariffs.
Also on Wednesday, payroll company ADP said private sector payroll had risen to just 62,000 in April.
The White House has said in recent weeks that Trump’s tariffs are intended as a negotiation tactic, but leaders around the world say they will retaliate if Trump continues to try to bully them in negotiations.
“If they choose to keep silence, compromise and cower, it’s just that the bully wants to push his luck more,” said China’s foreign minister Wang Yi on Monday.
Trump was sensitive to criticism of his tariffs and their impact on the economy. At one point last month, Trump threatened to remove Jerome Powell from his role as chairman of the US Federal Reserve after Powell said Trump’s tariffs could lead to permanent price increases.
After the market fell, Trump eventually retreated, informing reporters that he had no intention of firing Powell.