The US economy is experiencing a slowdown, with government data showing economic growth contracting for the first time in three years. The gross domestic product (GDP) fell at an annualized rate of 0.3% in the first quarter, a sharper decline than predicted by most economists. This sharp contraction in GDP is a major red flag and could signal a recession.
The economy’s slowdown can be attributed to several factors, including President Trump’s tariff plans and supply chain upheaval. The data captures activity between January 1 and March 31, which includes the president’s initial tariffs against Mexico and Canada, as well as the anxiety building around “Liberation Day” tariffs.
Consumer spending growth, the primary engine of the US economy, fell to a rate of 1.8%, down considerably from 4% in the prior three-month period. Federal government spending contracted by 5.1%, while inflation rose at an estimated pace of 3.6%. These numbers signal that Americans are not loving the current economic vibe.
The official definition of a recession is a significant decline in economic activity spread across the economy and lasting more than a few months. To meet this standard, the National Bureau of Economic Research requires at least two quarters of back-to-back contractions in GDP. However, other factors such as the sharpness of the decline, duration, and widespread impact also come into play.
The current labor market remains strong, but it’s not expanding at the same feverish pace as it was during Trump’s presidency. Consumers are pulling back on expenditures like summer vacations and dinners out, indicating a pre-bargaining mindset, similar to stocking up for a hurricane rather than a party. The economic damage caused by Trump’s tariffs is already being felt, with volatility in financial markets and paralyzed businesses.
The second quarter’s data will capture the full impact of Trump’s tariffs on China and the rest of the world. While there will be pain that can’t be undone, how long it lasts depends entirely on the duration of these tariffs.
Source: https://edition.cnn.com/2025/04/30/business/are-we-in-a-recession-nightcap