INSTANT VIEW-Q1 US GDP shrinks amid import surge to front-run tariffs

April 30 (Reuters) - The U.S. economy contracted in the first quarter, weighed down by a deluge of goods imported by businesses eager to avoid higher costs, underscoring the disruptive nature of President Donald Trump's often chaotic tariff policy.

Gross domestic product decreased at a 0.3% annualized rate last quarter, the Commerce Department said in its advance estimate on Wednesday. Economists polled by Reuters had forecast that GDP increased at a 0.3% pace in the January-March period.

The survey was, however, concluded before data on Tuesday showed the goods trade deficit surged to an all-time high in March amid record imports, which prompted a sharp downgrade of GDP estimates. The economy grew at a 2.4% pace in the fourth quarter.

MARKET REACTION:

STOCKS: S&P 500 emini futures EScv1 extended to a 1.27% loss, pointing to a weak open on Wall Street

BONDS: U.S. Treasury 10-year yield moved to US10YT=TWEB at 4.1946% and the two-year yield US2YT=TWEB rose to 3.658%

FOREX: The dollar index =USD turned 0.21% lower

COMMENTS:

PETER ANDERSEN, FOUNDER OF ANDERSEN CAPITAL MANAGEMENT, BOSTON

"There shouldn't be a surprise, but the market is acting as if it is a surprise. This period where tariffs are trying to be negotiated and acknowledged by the market makes things extremely difficult to model, predict, etc. When the market cannot make a reasonable prediction, it tends to turn to the pessimistic interpretation of things."

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“The economy has shown negative growth, which means that we are probably already in a mild recession, or we're about to enter a mild recession.”

“That's obviously bad news but I would kind of think that the market has been already discounting the possibility of a mild recession now.”

“We got to these numbers because of Trump's policies, right? They've created uncertainty and when you create uncertainty, nobody's going to put their foot on the accelerator, and we're seeing that as the earnings come out, right? Guidance has been pulled back.”

“So Trump's policies have created this. But you know, he himself many times has said we might be headed for recession. He's not denied that. Is he going to take a victory lap with these numbers? No, of course not.”

“But these numbers may accelerate the administration in perhaps reversing the tariff policy, and that would psychologically be a big boost to the economy.”

“I think the damage has already been done and so no matter what they do now, they just have to hope that the recession is not a steep one and that the there is a positive ending to the tariff situation. That's what the administration needs to hope for at this point.”

JAMIE COX MANAGING PARTNER, HARRIS FINANCIAL GROUP, RICHMOND VIRGINIA.

"I'm not surprised the headline GDP print wasn't worse, given the surge in imports. Underneath, however, real final demand remains super strong. Those who underestimate the US consumer, do so at their own peril."