Trump liberates America from growth on 100th day in office
"It’s official: Donald Trump has finally liberated the American economy - from growth”, jibed New York congressman Ritchie Torres, as Donald Trump’s 100th day in office coincides with news that the US economy has shrunk for the first time in three years.
Torres marked the milestone by congratulating Trump for "Making Recessions Great Again."
The figures released today by the US Bureau of Economic Analysis certainly complicate the US President’s efforts to celebrate his 100th day by boasting of his economic achievements in office thus far.
The US economy slowed dramatically in the first three months of this year, with growth down 0.3 per cent - a sharp downturn.
Today’s GDP report covers the month of January through to March - a period during which Trump imposed his 25 per cent levies on goods from Canada and Mexico but just prior to the announcement of his sweeping set of “liberation day” tariffs on 2 April.
Even so, Trump’s trade policy goes a long way to explaining the contraction.
The major culprit behind the negative reading in the first quarter was the biggest ever surge in imports - of 40 per cent - as American businesses rushed to bring in more goods from overseas before further tariffs, raising the cost of imports, took effect. This frenzied activity resulted in a record US trade deficit, shaving a whopping 4.8 percentage points off GDP.
Trump’s team will no doubt argue that the dismal GDP figures are not a harbourer of things to come: after all, the hammering to growth caused by a rush to import before tariffs hit is context specific to this first quarter.
Yet other causes of the last quarter’s economic slowdown do point to a potentially enduring trend.
The contraction was also driven by a slowdown in US consumer spending, which grew just 1.8 per cent on an annualised basis between January and March, well below the 4 per cent and 3.7 per cent annualised gains in the final two quarters of the Biden administration. And many economists predict that spending will slow even more in the second quarter of this year, as the economic uncertainty of Trump’s chaotic trade policy takes its toll on consumer and business confidence.
Alongside its growth estimations, today’s GDP report also says that rate of inflation climbed to 3.6% in the first quarter of this year - up from 2.4% in the prior three-month period. Thankfully for Trump, these inflation figures are likely to have overstated the current level of price increases. More up-to-date inflation readings elsewhere show prices rising around 2.5 per cent.
Even so, the broad economic consensus is that the US economy is slowing, while Trump’s tariffs are simultaneously renewing upwards pressure on inflation.
It’s worth remembering that hammering Biden for presiding over high inflation was one of Trump’s key election campaign tactics. “I will direct all members of my cabinet to marshal the vast powers at their disposal to defeat what was record inflation and rapidly bring down costs and prices,” insisted Trump back in his inaugural address.
Trump kickstarted his second stint in office by vowing to deliver “the most extraordinary first 100 days of any presidency in American history”.
And extraordinary, they have been. Trump the disrupter has upended American politics and changed the entire world, perhaps irreversibly.
He intended to use his 100th today to boast of, amongst other things, his economic record so far: which includes securing over $5tn in investments from a group of firms whose CEOs are visiting the White House today. Investments which the White House claims will create over 450,000 new jobs and usher in an age of "American prosperity".
But news of America’s first economic contraction in three years has rather put a damper on any efforts to tout his fiscal achievements today.
Though don’t expect any admission of this from the White House. As we’ve witnessed with Trump’s chaotic policy far, every failure is dressed up as a victory. The imposition of crippling tariffs on 57 of America’s trade partners? Master of the deal. A rush to remove said tariffs after financial turmoil threatens the stability of US Treasury bonds? Master of the deal.
Trump never admits he made an error. But, as Anthony Peters wrote recently in Reaction, if we pay close attention to his latest comments on China and his softening on Fed Chair Jerome Powell, “the President’s rock-solid conviction that he has been right, and the rest of the world wrong certainly looks to have suffered a wobble.”
Caitlin Allen
Deputy Editor
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