US economy contracts in first quarter; Trump says ‘be patient’, blames Biden

WASHINGTON – The US economy contracted in the first quarter, weighed down by a deluge of goods imported by businesses eager to avoid higher costs, underscoring the disruptive nature of President Donald Trump’s often

chaotic tariff policy

.

In response, Mr Trump blamed his predecessor, Mr Joe Biden.

“I didn’t take over until January 20th,” he posted on social media. “Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers. Our Country will boom, but we have to get rid of the Biden ‘Overhang’.”

Gross domestic product (GDP) decreased at a 0.3 per cent annualised rate, the Commerce Department said in its advance estimate of first-quarter GDP on April 30.

Economists polled by Reuters forecast that GDP increased at a 0.3 per cent pace in the January to March period. The survey was, however, concluded before data on April 29 showed the goods trade deficit surged to an all-time high in March amid record imports, which prompted most economists to sharply downgrade their GDP estimates.

The economy grew at a 2.4 per cent pace in the fourth quarter.

“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 figures were published on the 101st day since Mr Trump’s return to office on Jan 20.

In that time, he has announced several rounds of tariffs, laying out plans in March to impose sweeping tariffs on top trading partners from early April in a bid to reset US trade relations.

The introduction of those tariffs

sparked a sell-off

in financial markets, sending volatility surging to levels not seen since the Covid-19 pandemic and spooking investors.

“Usually, government policy doesn’t change that much, particularly not in the first 100 days of a presidency,” George Washington University Professor Tara Sinclair said before the data was published. “But this one’s different.”

“I think it’s pretty clear that there were dramatic policy changes that are directly weakening the economy,” she said.

Not surprising

The report reinforced Americans’ growing disapproval of Mr Trump’s handling of the economy so far. He swept to victory on voter angst over the economy, especially inflation. Consumer confidence is

near five-year lows

, and business sentiment has tanked.

Airlines have pulled their 2025 financial forecasts, citing uncertainty over spending on non-essential travel because of tariffs, which economists have warned will raise costs for companies and households.

Given that an unusually large amount of non-monetary gold accounted for some of the jump in imports, some economists warned against placing too much weight on the GDP number.

Others argued that the data did not change the narrative of an economy struggling because of uncertainty due to tariffs.

Inflation picked up in the fourth quarter of 2024 and is expected to rise further through 2025. Economists expect the Federal Reserve to resume cutting interest rates at some point.

Mr Trump on April 29

softened the blow of his auto tariffs

through an executive order mixing credits with relief from other tariffs on parts and materials.

A

145 per cent tariff

on Chinese goods, which unleashed a trade war between Washington and Beijing, remains in place, as does an array of other import duties.

Mr Trump sees tariffs as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining US industrial base. REUTERS, AFP