RPT-BREAKINGVIEWS-US economic stall hints at a freefall to come

By Gabriel Rubin

WASHINGTON, April 30 (Reuters Breakingviews) - Though he wasn’t even president for the entire quarter, the first official report on the health of the U.S. economy in 2025 bears the unmistakable imprint of Donald Trump. An estimated 0.3% annualized decline in gross domestic product between January and the end of March resulted from a host of contradictory factors, overwhelmingly a rush of imports as firms and consumers looked to get ahead of crushing tariffs. For now, employment remains strong, spending is up, and the real shock of a trade schism awaits. While that makes Wednesday’s figure a hard-to-parse oddity, signs of weakness are creeping in.

Two numbers show the good and bad of the U.S. economy as it existed prior to Trump’s “Liberation Day” tariff announcements on April 2. Consumers, overall, continue to spend, especially on services and some durable goods like automobiles. But expectations of incoming trade levies pushed businesses to stockpile goods from overseas. Imports increased at a 41.3% pace, the yawning gap with exports knocking nearly 5 percentage points from headline GDP.

Given the still-low 4% unemployment rate during the quarter, while layoffs remained muted despite federal job cuts, the all-important American consumer is thus far cushioned. Set aside the noise from imports, and this is not a picture of an economy in recession. Even the apparent contraction might shift with time. GDP data, especially inventories, is notoriously difficult to collect. The Bureau of Economic Analysis will release two updates to its initial estimate, which can meaningfully change the final number. Tweaks during periods of crisis, like 2008, can be much larger.

The unusualness of the current moment, when the greatest risk is not some cyclical down-shift but Trump’s zig-zagging policies, will probably continue to scramble the GDP picture. Imports may snap back in the current quarter as tariffs bite, for instance. Instead, hard data like ocean shipping volumes presage the concrete effects of a break in commerce between the U.S. and China, with Los Angeles port operators expecting a 35% drop in cargo from Asia.

And as companies absorb trade-related costs, employment may take a hit. Though its projections often differ substantially from official figures, payroll processor ADP estimates that private-sector job gains slowed to 62,000 in April, a third the rate at the beginning of the year. Wage gains, too, seem to be drifting further down from post-pandemic highs. Amid the statistical noise, impossible-to-ignore signals will begin to emerge.

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CONTEXT NEWS

U.S. gross domestic product contracted at an annualized rate of 0.3% in the first quarter of 2025, according to an advance estimate published by the Bureau of Economic Analysis on April 30.

The result was weighed down by a flood of imports, which outpaced growth in consumer spending, investment and imports.