The US economy shrank between January and March in its worst performance for three years – with Donald Trump blaming former president Joe Biden.
The first US economic growth figures since Mr Trump returned to the White House on 20 January show the world’s largest economy contracted at an annualised rate of 0.3% during the first three months of the year.
An annualised rate is a calculation of economic performance over 12 months, as opposed to just one quarter.
Data shows the contraction is due to a surge in imports, as US companies tried to bring in foreign goods before Mr Trump announced import tariffs in order to beat price increases, worsening the trade deficit he hates.
However, after the figures were released, Mr Trump blamed his predecessor for the slowdown in growth.
He wrote on his Truth Social platform: “This is Biden’s Stock Market, not Trump’s. I didn’t take over until January 20th.
“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’.
“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!”
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Economists and financial markets had largely expected growth of 0.3% before today’s figures were released by the Commerce Department.
The 0.3% contraction is sharply down on the solid 2.4% rate of growth measured over the previous three months when Mr Biden was president.
Meanwhile, imports grew at a 41% pace during the first three months of this year, the fastest since 2020, due to companies seeking to stockpile goods before higher tariffs came into effect.
The US trade deficit has widened sharply since December – despite Mr Trump’s aim of using tariffs to cut the gap between the value of America’s exports and imports.
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There are fears that inflation in America will rise sharply due to higher import costs being passed on, limiting the US central bank’s ability to cut interest rates for consumers and businesses alike.
It comes as consumer spending slowed sharply between January and March – 1.8% growth from 4% in October to December last year.
Federal government spending plunged 5.1% in the first quarter.
Many economists say that Mr Trump’s massive import taxes – and the erratic way he has rolled them out – will hurt growth in the second half of the year and that recession risks are rising.
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Mr Trump inherited a solid economy that had grown steadily despite high interest rates imposed by the Federal Reserve to fight inflation.
His trade policies – including 145% tariffs on China – have reportedly paralysed businesses and threatened to raise prices and hurt consumers.
There is potential evidence emerging that the country’s strong job market, a pillar of the US economy during the pandemic recession, may be weakening.
On Wednesday, payroll provider ADP showed that companies added just 62,000 jobs in April, about half of what was expected, and down from 147,000 in March.
That could be a signal that businesses may be taking a more cautious approach to hiring amid uncertainty over tariffs.
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Employers in the education and health, information technology, and business and professional services industries all cut jobs.
“Unease is the word of the day,” said Nela Richardson, chief economist at ADP.
“It can be difficult to make hiring decisions in such an environment.”
However, ADP figures often diverge from the government’s jobs reports.
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Will there be a recession?
The International Monetary Fund recently forecast annual growth of 1.8% for the US this year.
But some economists see a 50/50 chance of a recession ahead.
US futures showed further falls for stock markets on Wall Street at the open.
How Trump responds will be the most eagerly anticipated information for investors moving forward.
