"Economic downturn intensifies as markets retreat:"

 "Economic downturn intensifies as markets retreat:"

Update News Today April 30,2025,11:50 am

U.S. Economy Shrinks as Tariff Fears Drive Import Surge

The U.S. economy contracted in the first quarter of 2025, dragged down by a record wave of imports ahead of sweeping tariffs enacted by President Donald Trump. The surge widened the trade deficit and temporarily stifled growth.

Gross domestic product (GDP)—the broadest measure of U.S. economic output—fell at an annualized rate of 0.3% from January through March, a sharp reversal from the 2.4% increase seen in the final quarter of 2024. The decline marked the first quarterly contraction in three years and rattled financial markets, with stocks sliding early Wednesday.

https://www.profitableratecpm.com/izpw9zaa4?key=a7a450d9ff4cf620c9acd2f6733a79c4

Tariff Rush Blamed for Economic Dip

Economists attributed the GDP decline to an unprecedented import surge as companies rushed to stockpile goods ahead of rising tariffs. January imports reached a record $320 billion— the highest monthly total since the Census Bureau began tracking the data in 2002—driven by sharp increases in shipments from China, Canada, and Mexico.

Imports remained elevated in February at over $290 billion, up 21% from the same month in 2024. The spike continued despite a temporary pause on Canadian and Mexican tariffs. Chinese tariffs doubled in early March, with some rates jumping to as high as 145% by mid-month.

Chinese exports to the U.S. surged in December 2024, hitting $48.8 billion as businesses prepared for Trump’s promised trade crackdown upon taking office.

Trump Blames Biden for Economic Woes

President Trump pinned the blame for the economic downturn on his predecessor, dubbing it the “Biden Overhang.” In a post on Truth Social, Trump claimed the economic troubles were inherited.

“This is Biden’s Stock Market, not Trump’s,” he wrote. “Our country will boom, but we have to get rid of the Biden ‘Overhang.’ This has NOTHING TO DO WITH TARIFFS.”

Market Reaction

Markets tumbled on the news. The Dow Jones fell 1.4% (down 569 points), the S&P 500 dropped 1.7% (92 points), and the Nasdaq slid 2.1% by midmorning. The VIX, Wall Street’s volatility gauge, spiked 15%.

Companies also cited tariffs in earnings reports. Super Micro shares plunged 17% after forecasting weak quarterly results. Snap fell 16% after withholding guidance due to economic uncertainty and tariff-related advertising disruptions.

Are We in a Recession?

Not yet. A single quarterly decline does not constitute a recession, which is typically defined as two consecutive quarters of negative growth. However, the contraction marks the weakest showing since early 2022. Key economic indicators—such as consumer and business spending—remained positive, suggesting the downturn is more of a temporary trade-related dip.

Imports Soar, Trade Gap Widens

Imports rose at a 50.9% annual rate in Q1, widening the trade deficit by $14 billion to a record $162 billion in March. The ballooning trade gap shaved about 5 percentage points from GDP growth.

Economists expect some of this drag to be reversed in Q2, as companies work through large inventories. A more stable measure of core domestic demand—final sales to private domestic purchasers—rose 3.9%.

Outlook: Stagnation or Recession Ahead?

https://www.profitableratecpm.com/izpw9zaa4?key=a7a450d9ff4cf620c9acd2f6733a79c4

Analysts warn the economy may stagnate in the coming months, with some forecasting a mild recession by late 2025. Along with tariffs, mass federal layoffs and immigration crackdowns are expected to slow growth.

Consumer Spending Holds Up

Consumer spending rose 1.8%, down from 4% in Q4, but still decent considering stock market volatility and bad weather. Strong wage growth and low household debt have supported consumer resilience.

Government Spending Drops

Government spending fell 1.4% overall, with federal outlays plunging 5.1% following major budget cuts and layoffs under Elon Musk’s Department of Government Efficiency (DOGE). State and local spending rose modestly by 0.8%.

Business Investment Rebounds

Business investment surged 9.8% after a 3% decline in the previous quarter, largely due to pre-tariff purchases of equipment. Capital goods imports boosted equipment spending by 22.5%, though future investments may slow amid ongoing uncertainty.

Housing Growth Slows

Housing investment increased 1.3%, down from a 5.5% rise in Q4. Builders are wary of tariff-driven material cost increases and persistently high mortgage rates, which continue to deter homebuyers.

Will the Fed Cut Rates?

While weak GDP could prompt rate cuts, the Federal Reserve is likely to hold steady due to rising inflation, which hit 3.7% in Q1. Officials face a difficult balancing act as they navigate a possible period of stagflation—sluggish growth coupled with rising prices.

The Fed next meets on May 6 to assess the evolving economic landscper.