US Economy Ends Worst Quarter in Three Years: Experts Blame Trump, He Blames Biden

The U.S. economy posted its worst quarterly performance since 2022, as President Donald Trump's significant policy shifts rattled consumers and businesses, the CNN.

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Gross domestic product, which measures the value of all goods and services produced in the economy, fell at an annual rate of -0,3% in the first quarter, according to the Commerce Department.

That was a sharp slowdown from the 2,4% growth in the fourth quarter of last year and well below economists' forecast of 0,8% growth. The GDP figures are adjusted for seasonal fluctuations and inflation.

The US stock market plunged after the GDP report was released.

On the subject: Beggar thy neighbor and yourself: Trump tariffs could be a disaster for the US

The Trump administration has pursued a chaotic tariff policy in recent months, fueling trade tensions with China and raising concerns among Americans. Most economists believe that Trump’s attempt to radically change global trade will likely lead to higher inflation in the U.S. and could even trigger a recession.

However, the president refused to accept responsibility for the weak economic performance reflected in the first "economic report card" of his second term.

"Our country will prosper, but we must get rid of the 'Biden legacy,'" he wrote on social media on April 30. "It will take time, IT HAS NOTHING TO DO WITH THE TARIFFS, he just left us with bad numbers. But when the boom comes, it will be like no other. Be PATIENT!!!"

At a Cabinet meeting on Wednesday, April 30, Trump reiterated his position: “This is Biden’s business, not Trump’s.”

The economy's contraction at the start of the year was driven by a widening trade deficit — a result of Americans buying goods in advance in anticipation of Trump's tariffs — and a reduction in government spending. Imports rose from -1,9% in the fourth quarter to 41,3% in the first three months of the year. Exports, meanwhile, were up 1,8%.

When imports exceed exports, it reduces GDP, and that was the main drag on growth in the first quarter. The gap between imports and exports reduced GDP more than at any time since 1947.

Trump's top trade adviser Peter Navarro called the GDP report "the best negative numbers I've ever seen."

“Markets have to look deeper,” Navarro told CNBC on April 30, pointing to a sharp rise in domestic investment last quarter. But much of that growth was due to companies stockpiling supplies ahead of tariffs, the Commerce Department noted.

Report details

Despite the warning signs, there were some positives in the first GDP report of Trump's second term.

Consumer spending, which accounts for about 70% of the U.S. economy, slowed sharply to 1,8% in the first quarter, down from 4% in the previous quarter. The slowdown was driven largely by Americans cutting back on spending on goods and was the weakest since mid-2023.

Government spending also contributed to the decline, with federal spending falling to -5,1% from 4% over the same period.

Meanwhile, businesses have stepped up investment, likely to outpace tariff-induced price increases. Firm investment rose 9,8% in the first quarter, after falling 3% in the fourth quarter. Gross private domestic investment was 21,9% in the January-March period, the highest since late 2021.

Stephen Miran, head of the White House Council of Economic Advisers, said boosting business investment "is not something companies do if they are afraid of the future."

Also notable is the rise in final sales to private domestic buyers, a key measure of underlying demand in the economy, to 3% in the first quarter from 2,9% in the fourth. The White House pointed to that figure as a sign of “strong domestic economic momentum since President Trump’s inauguration.”

“It’s no surprise that the ‘legacy’ of Biden’s economic collapse is dragging growth down, but the underlying numbers tell the real story — the momentum that President Trump is bringing,” said presidential spokeswoman Caroline Leavitt. She added that the events of recent months are “igniting an economic boom and setting the stage for unprecedented growth in a new Golden Age under President Trump.”

The April 30 report said inflation accelerated sharply in the first quarter. The personal consumption expenditures (PCE) price index rose 3,6%, up from 2,4% in the fourth quarter. Excluding food and energy prices, the core PCE index rose 3,5%, up from 2,6% in the previous quarter.

This is not a recession yet

While the latest GDP report shows a significantly weaker economy than last year, that doesn't mean the U.S. is already in recession.

Technically, a recession is defined as a broad contraction in the economy (including the labor market, consumer spending, industrial activity, and business investment) that lasts more than a few months. And while many people are feeling the effects of a recession, according to surveys, the economy is still holding up in a number of important ways.

Unemployment remains relatively low at 4,2% as of March, businesses continue to invest, and consumers have yet to show widespread spending cuts.

However, the situation could quickly worsen, especially if Trump ratchets up the pressure with trade tariffs.

"We can't yet call a recession based on this data, but it does signal that we are teetering on the edge, and the longer the tariffs remain in place, the higher the risk of an economic downturn," said Gregory Daka, chief economist at Ernst & Young.

A separate report released April 30 showed a sharp decline in private sector hiring in the U.S., which does not bode well for future economic growth.

Employers added just 62 jobs in April, down significantly from 000 in March, according to ADP.

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"The word of the day is 'uncertainty.' Employers are trying to reconcile uncertainties in policy and consumer sentiment with generally positive economic data," said ADP Chief Economist Nela Richardson. "It's difficult to make hiring decisions in this environment."

A recession is usually defined as two consecutive quarters of GDP decline, which has not happened yet. The official body that recognizes a recession is the National Bureau of Economic Research, but its conclusion may come months after the actual downturn begins.

The last time the U.S. economy went into recession was in 2020, when it lasted just two months, due to the COVID-19 pandemic. Before that, there was the Great Recession of 2007–2009, the worst economic downturn since the Great Depression.

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