Washington (AFP) – President Donald Trump lashed out at his predecessor’s economic record Wednesday after US financial markets fell on the news that the American economy unexpectedly contracted in the first three months of the year. The gross domestic product of the world’s largest economy decreased at an annual rate of 0.3 percent in the first quarter, after growing 2.4 percent in the final months of 2024, according to Wednesday’s estimate from the US Commerce Department. This was sharply below the market consensus estimate of 0.4 percent growth, according to Briefing.com, and marked the first quarterly contraction since 2022.
All three major Wall Street indices fell at the open, with the Nasdaq sliding more than two percent before paring some losses in morning trading. “The downturn in real GDP in the first quarter reflected an upturn in imports, a deceleration in consumer spending, and a downturn in government spending,” the Commerce Department said in a statement. The surge in imports reflects businesses and consumers stockpiling foreign goods to get ahead of Trump’s sweeping tariffs, which went into effect earlier this month.
“That’s Biden, that’s not Trump,” the US president said at the start of a cabinet meeting in Washington, referring to the poor GDP figures. Striking a more positive tone, he highlighted the “whopping” 22 percent rise in gross domestic investment during the first quarter. Annual economic growth stayed above two percent in every year of Biden’s presidency, reaching 2.8 percent in 2024.
– ‘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 January 20, along with fresh data showing a slowdown in the US Federal Reserve’s favored 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 percent rate for most countries. It also announced sector-specific measures on steel, aluminum, and automobiles and parts not made in the United States, and new sweeping tariffs totaling 145 percent on China. Beijing has responded with its own steep, targeted measures against US goods.
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.”
“The U.S. economy is at a greater risk of recession now than it was a month ago, but this 0.3 percent contraction in Q1 GDP is not the start of one,” economists at Wells Fargo wrote in an investor note. “It reflects instead the sudden change in trade policy that culminated in the biggest drag from net exports in data going back more than a half-century,” they said.
© 2024 AFP
