Trump blames Biden for shrinking US GDP
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More news: US President Donald Trump told Americans to “be patient” on Wednesday in the face of Q1’s GDP contraction, arguing that his tariffs will eventually drive a boom in the US. In a post on Truth Social, Trump said that “This is Biden’s Stock Market, not Trump’s.”
He continued: “we have to get rid of the Biden “Overhang.” This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers, but when the boom begins, it will be like no other. BE PATIENT!!!”
US economy contracts 0.3% on import surge
The news: US GDP came in below expectations for the first quarter, sliding by an annualised 0.3%, as companies scrambled to stockpile imports ahead of Trump’s tariffs.
The numbers: The GDP drop was worse than economists had forecast, and compared starkly with the 2.4% growth rate recorded for the fourth quarter of 2024. The Bureau of Economic Analysis (BEA) said that the fall was primarily due to firms’ efforts to accumulate inventory before the tariffs took effect, with the trade deficit for goods hitting a record high in March.
Stock futures dropped and bond yields rose slightly on the data. While the two-year Treasury yield, was up 0.01 percentage points to 3.66%.
The context: Net exports subtracted almost five percentage points from GDP, while imports surged an annualised 41%, the largest advance in imports in almost five years. Bloomberg reports that economists see the sharp widening of the trade deficit reversing in the second quarter.
In addition to inventory stockpiling, the BEA also attributed the Q1 drop to a decrease in government spending. The movements were partly offset by increase in investment, consumer spending and exports. Consumer spending advanced at a 1.8% pace, its lowest since 2023.
A large fall in consumer sentiment was reported earlier this week, which dropped 32% in April to its lowest level since the 1990s, and forecasters are currently split as to the likelihood of the US falling into a recession over the next 12 months.
The sources: Bureau of Economic Analysis, Bloomberg
