Source: Bureau of Economic Analysis | By The New York Times
The economy shrank by 0.3 percent in the first three months of the year, a sharp reversal from the previous quarter’s strong growth. The decline, however, may not be as bad as it sounds. It mostly reflects quirks in the way we measure economic activity. (Ben Casselman, The Times’s chief economic correspondent, explained those quirks in detail.)
The data suggests that the economy would be solid if Trump’s tariffs didn’t fuel uncertainty and scare American consumers and businesses. David Sanger, a White House correspondent, explained how Trump’s own policies strike directly at his political appeal as a competent steward of the economy.
The report doesn’t cover the period after what Trump called Liberation Day, when he announced tariffs that tanked stock markets and launched a trade war with China. In other words, tariffs could make coming reports worse. We just don’t know how much worse yet. — German Lopez, writer for The Morning
Trump held a televised two-hour Cabinet meeting today, at which administration officials sat behind red MAGA hats and praised him so extravagantly that right-wing commentator Ann Coulter posted: “Would it be possible to have a cabinet meeting without the Kim Jong il–style tributes?” He blamed Biden for the contracting economy and told reporters that “you could even say” that any downturn in the second quarter is Biden’s fault, too. The White House put out an official statement blaming former president Joe Biden for today’s report of the shrinking GDP and saying the country’s underlying economic numbers remain strong. In fact, Biden left behind an economy that The Economist called “the envy of the world,”
The pain from Trump’s tariffs has already hit agriculture as China has largely stopped buying American products, from pork and soybeans to lumber. Peter Friedmann, executive director of the Agriculture Transportation Coalition, a leading export trade group for farmers, told Lori Ann LaRocco of CNBC that the sector is already in “full-blown crisis” as farmers have sustained “massive” financial losses.
Economists expect the confusion and uncertainty of Trump’s tariffs to hurt growth more broadly in the second quarter of 2025 as container ships from China stop arriving in the U.S. in early to mid-May, about a month after Trump’s April 2 “Liberation Day” imposed a 145% tariff on goods from that country. Executive Director Gene Seroka of the Port of Los Angeles told CNBC’s Squawk Box yesterday that beginning next week, shipping volume at the port will drop over 35%. Executive Director of the Port of Oakland, California, Kristi McKenney noted that the lack of import trade will hurt exports as well, endangering the jobs of dockworkers, warehouse workers, and truck operators.
The East Coast ports will see similar drops a couple of weeks after the West Coast ports. United Parcel Service (UPS) has already announced that it is laying off about 20,000 employees and closing 73 of its buildings by the end of June. It says it anticipates lower volumes of shipping from its largest customer, Amazon, because of the tariffs.
Economists expect the lack of goods from around the globe, especially from China, to create shortages and higher prices. Notably, the tariffs will hit toys and Christmas items. China produces 80% of the toys sold in the U.S. and 90% of the Christmas goods. Ordering of inventory for the holidays is normally underway by now, Daisuke Wakabayashi of the New York Times reports, as it takes four to five months to make, package, and ship products to the U.S. from China. But currently the tariffs have shut down that trade.
Trump seemed to acknowledge that today when he said: “Well, maybe the children will have two dolls instead of 30 dolls, you know? And maybe the two dolls will cost a couple of bucks more than they would normally. But we’re not talking about something that we have to go out of our way. They have ships that are loaded up with stuff. Much of which—not all of it—but much of which we don’t need.” Ironically, the Republican Party made accusations that Biden was “ruining Christmas” a central theme of political attack in 2021, 2022, and 2023.
Chip Cutter, Bob Tita, and Stephen Wilmot of the Wall Street Journal reported yesterday that more than 80% of senior executives are worried about Trump’s tariffs and his other economic policies, and many companies say they are unable to predict future earnings. Treasury Secretary Scott Bessent says that uncertainty is strategic, intended to give the administration a leg up in negotiations.
The S&P 500 has fallen 7 percent since Trump took office. That’s the worst start to a presidential term since Gerald Ford in 1974.
The Senate rejected an effort to undo Trump’s tariffs.
Adidas said that its sneakers and sportswear would cost more in the U.S
.
Tariffs led Japan to slash its economic growth forecast.
