The GDP Drop Isn’t as Bad as It Looks
The economic contraction last quarter should make policymakers cautious about an extended trade war.
The trade difference.
Photographer: Eric Thayer/Bloomberg
The US economy contracted at a 0.3% annualized pace in the first quarter, slightly worse than economists surveyed by Bloomberg had projected. At a high level, the numbers show that the economy is in no position for the White House to forge ahead with its self-sabotaging global trade war that will hurt consumers and businesses. But there’s still time to right the ship, and it doesn’t mean that a recession is inevitable.
The latest numbers were overwhelmingly dragged lower by a surge in imports, apparently the result of firms trying to front-run Donald Trump’s tariff agenda, the most shocking part of which — the so-called “Liberation Day” levies — was unveiled two days after the end of the quarter. GDP math seeks to measure the total production within a country’s borders, so statisticians add exports and subtract imports, and the trade figures can make the data seem volatile from quarter to quarter.