The U.S. economy recorded a surprise contraction of 0.3% year-on-year in the first quarter of 2025, an unexpected setback in the first 100 days of Donald Trump's second term. The figure – the first negative one since 2022 – was attributed to the sharp increase in imports, a product of the anticipation of the new tariffs announced by the administration. However, the president placed the blame squarely on his predecessor, Joe Biden.
"That's Biden's fault, not Trump's," the president said during a cabinet meeting. Despite the setback, he highlighted as positive the 22% increase in gross domestic investment, which he called "impressive." The Commerce Department indicated that the fall in GDP was also due to the slowdown in consumption, the reduction in public spending and the decline in net exports.
The market had expected an expansion of 0.4%, so the decline surprised analysts and investors. On the other hand, this Friday, the Labor Department published a report that moderated the pessimism: the economy created 177,000 jobs in April, far exceeding the market's expectation (130,000), although below the 185,000 generated in March. The unemployment rate remained at 4.2%, unchanged from the previous month.
Sectors such as health, transportation, financial services and social assistance registered employment gains. However, the public sector lost an additional 9,000 jobs in April, adding to a total drop of 26,000 since January, amid the federal government's drive to downsize the state. The Trump administration faces legal action after attempting to lay off tens of thousands of public employees as part of its spending-cutting plan, led by the so-called Department of Government Efficiency.
On the earnings front, the average hourly wage rose 0.2% to $36.06, a moderate growth in line with contained inflation figures. Dual narrative: between risk and rhetoric For the White House, the jobs report reaffirms the structural strength of the economy. "GDP is a lagging indicator.
What matters is investment, jobs and President Trump's leadership," said Karoline Leavitt, presidential spokeswoman. In contrast, Senate Democratic leader Chuck Schumer declared that "the MAGA experiment is killing our economy" and called the GDP contraction "a shrill alarm for all Americans." Wells Fargo economists warned that the risk of recession has increased, although they clarified that a single contraction does not mean that the economy has already entered a technical recession.
They stressed that the main cause was the immediate impact of the new tariff scheme and its distorting effect on foreign trade. Trade tensions and market signals The across-the-board 10 % tariffs, implemented by Trump in April, have been met with strong criticism and responses from abroad. China has tightened its restrictions on U.S. products, while other countries are warning of possible retaliation.
The measures have caused volatility in the markets and a temporary drop in the main stock market indexes. Despite the pressure, Trump is standing firm. In a defiant tone, he declared this week that "maybe the kids will have two dolls instead of 30," in reference to the need to reduce imports.
He added, "Maybe those two dolls will cost a few dollars more." The president said he was willing to negotiate with China, but analysts warn that the tariff escalation has already left its mark on economic dynamism. With information from AFP
