The U.S. economy shrank in the first quarter of the year. The decrease was mainly because businesses rushed to import goods to avoid higher costs due to President Donald Trump’s confusing new tariff rules. The Commerce Department announced that the economy shrank at a rate of 0.3% during this time. Many experts had actually predicted that the economy would grow by 0.3% instead.
In the last quarter of the previous year, the economy had grown at a rate of 2.4%. Although the latest report sounded bad, it might not show the full picture. People are still spending money, but at a slower rate. This news has led to more Americans disapproving of how Trump is handling the economy.
Consumer confidence is low, and businesses are worried. For instance, airlines are uncertain about future travel because of tariffs, impacting their financial predictions. Some experts believe that the increase in imports, including a lot of gold that isn’t money, might make the GDP numbers look worse than they really are.
Inflation, which means prices are going up, also picked up last quarter and might continue to rise. Many economists think that the Federal Reserve will start lowering interest rates again soon.
On Tuesday, Trump attempted to ease concerns about auto tariffs by signing an executive order that balances credits and relief from certain import fees. Still, a 145% tariff on Chinese goods is in effect, along with many other import taxes. Trump believes that tariffs can bring in money needed for his promised tax cuts and help revive the U.S. industrial sector.
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