U.S. economy shrank 0.3% in Q1 amid Trump tariff impact

The Trump administration's tariff policy has taken a tangible toll on America's first quarter economic activity.

Findings show the country's GDP contracted by 0-point-3 percent on year and President Donald Trump insists that the former Biden administration is to blame.

Lee Eun-jin reports.

According to a Commerce Department report released on Wednesday, U.S. GDP in the first quarter of this year contracted 0-point-3 percent, marking the lowest GDP since the first quarter of 2022.

The latest GDP reading is also lower than what was forecast by economists, which, according to FactSet, was 0-point-8 percent growth, still down from the 2-point-4 percent growth recorded in the fourth quarter of last year.

The greatest cause for this sharp slowdown seems to have been President Trump's trade tariffs.

Imports soared 41-point-3 percent in the first quarter, which threw the balance of trade off largely by the rush to bring in imports before the tariffs went up.

But President Trump, during a Cabinet meeting at the White House, blamed former President Biden for the contraction, and even suggested that some responsibility for the next quarter would be Biden's as well, saying that such changes in the economy don't "just happen on a daily or an hourly basis."

Trump also said in a Truth Social post, "quote," "This is Biden's Stock Market, not Trump's. I didn't take over until January 20th."

Stock market volatility ensued following the release of the GDP report. But both the S&P and Dow marked their seventh straight day of gains, the S&P closing up 0-point-1-5 percent, while the Dow Jones Industrial Average added 0-point-3-5 percent. Meanwhile, Nasdaq Composite dropped 0-point-0-9 percent.

The personal consumption expenditures price index, the indicator for measuring inflation, stayed unchanged in March after advancing 0-point-4 percent in February. In the 12 months through March, the PCE increased 2-point-3 percent, after rising 2-point-7 percent in February last year.

Based on Wednesday's Commerce Department data, the economy is holding up for now, but uncertainty is rising as Trump's tariffs could upend the global order as well as the U.S. economy.

The latest figures don't actually reflect President Trump's "Liberation Day" tariffs, as those were announced on April 2nd, just after the end of the first quarter. As some of those tariffs have already been paused or modified, analysts are expecting a more pronounced slowdown in growth later this year as consumers and businesses adjust.

Meanwhile, President Trump wrote for everybody to be patient, saying the U.S. will soon "boom" after the tariffs start kicking in, and after the Biden "overhang" is gone.

Economists say the tariffs could weaken economic growth and stoke inflation, but analysts still say one quarter of negative GDP growth is not itself a sign that a recession is underway.

Lee Eunjin, Arirang News.