'This is President Trump's Economy': Betsey Stevenson

Betsey Stevenson, Professor of Public Policy and Economics at the University of Michigan and former Obama administration official, reacts to the Trump administration's spin on new GDP data and the president's claim the economy reflects Biden policies.

The US economy contracted at the start of the year for the first time since 2022 on a monumental pre-tariffs import surge and more moderate consumer spending, a first snapshot of the ripple effects from President Donald Trump’s trade policy.

Inflation-adjusted gross domestic product decreased an annualized 0.3% in the first quarter, well below average growth of about 3% in the prior two years, according to the government’s initial estimate published Wednesday.

The data highlight the scramble by companies to secure merchandise ahead of expansive tariffs, with net exports subtracting nearly 5 percentage points from GDP, the most on record, the Bureau of Economic Analysis report showed. A decline in federal spending also weighed on the figure.

Despite the contraction, the underlying details of the report suggest some key drivers of the economy remained on a good footing at the start of the year. Consumer spending — which accounts for two-thirds of GDP — advanced at a 1.8% pace, the weakest since mid-2023 but still better than economists had forecast. A gauge of underlying demand in the economy was solid, helped by the fastest growth in business equipment purchases since 2020.

Separate data out Wednesday showed that inflation-adjusted consumer spending climbed 0.7% last month — more than analysts expected — after an upward revision to the prior month. Meanwhile Federal Reserve’s preferred inflation gauge was unchanged in March, the tamest in almost five years, excluding food and energy.

Trump trade adviser Peter Navarro called the GDP report “the best negative print I have ever seen in my life” in an interview Wednesday with CNBC, saying consumption remained strong and the president’s deregulation efforts would buoy the economy.

President Donald Trump blamed former President Joe Biden for weak economic data that sent stocks tumbling, arguing government data showing increased domestic investment signaled his tariffs are working.

“I have to start off by saying, that’s Biden. That’s not Trump,” Trump said Wednesday during a Cabinet meeting.

Inflation-adjusted gross domestic product decreased an annualized 0.3% in the first quarter, well below average growth of about 3%, according to initial government data published Wednesday.

“Let’s give us a pass on the first month, we were sort of getting a little bit used to things,” Trump added.

The decrease was led by companies pushing to stockpile imported merchandise ahead of implementation of Trump’s tariffs, with net exports subtracting nearly 5 percentage points from GDP. Cuts to federal funding also impacted the figure.

White House officials have pointed to promising data within the report – including advancing consumer spending and surging business equipment purchases – to argue the economy remains strong.

“It takes a little while to get those facilities built, but they’re coming in with big big numbers,” Trump said.

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