President Donald Trump’s tariffs have roiled financial markets and upended global trading patterns. Now they are disrupting measures of economic growth as well.
US gross domestic product, adjusted for inflation, declined at a 0.3 per cent annual rate in the first three months of the year, the US Commerce Department said Wednesday. It was, on the surface, a stunning reversal from the strong growth at the end of last year, when the economy expanded at a 2.4 per cent rate.
But the first quarter figure was misleading, the result of quirks in the way government data measured the surge in imports as businesses and consumers raced to get ahead of expected tariffs. More reliable data on consumer spending and business investment suggested that growth slowed in the first quarter but remained fundamentally solid.
That strong foundation could be quickly eroding, however. The first quarter data showed early signs of the disruptions caused by Trump’s tariffs — and that was before the full extent of those policies became clear. Forecasters widely expect spending and investment to slow in the months ahead as tariffs drive up prices and uncertainty keeps businesses on hold.
“There’s a lot of reasons to expect the underlying trends in the US economy to soften,” said Ben Herzon, an economist at S&P Global Market Intelligence.
Consumer spending slowed in the first quarter, growing at a 1.8 per cent annual rate, down from 4 per cent at the end of last year. But economists said that was at least in part because of harsh winter storms that hit southern states in January, causing many shoppers to stay home. There is little sign, so far, that the steep drop in consumer sentiment that began shortly after Trump took office has yet translated into a pullback in actual spending.
New York Times News Service