On April 30th, Peter Navarro, the chief trade advisor to President Trump, stated that the U.S. economy contracting by 0.3% in the first quarter is actually positive news. He urged the market to “see the essence.”
Navarro told CNBC that domestic investment in the U.S. increased by 22%, and if inventory and import impacts are excluded, the actual data shows a strong performance.
“This is the best negative data I have seen today. The market needs to analyze deeply: our domestic investment has increased by 22%, which is remarkable; if we exclude the increase in imports caused by tariffs, the economy has actually grown by 3%. We are satisfied with the current situation,” he said.
Data released by the U.S. Commerce Department showed that the country’s Gross Domestic Product (GDP) in the first quarter declined by 0.3% on a seasonally adjusted basis, marking the first contraction since the first quarter of 2022.
Furthermore, consumer spending, a major driving force of the U.S. economy, grew by 1.8% in the first quarter, the smallest increase since mid-2023. Government efficiency department layoffs and reduced contract numbers led to a decrease in federal government spending.
Following the release of GDP data, the three major stock indexes experienced declines. In response, Trump posted on social media that the current stock market situation is a result of former President Biden’s four years in office.
“This is Biden’s stock market, not Trump’s. I only took over on January 20. We must get rid of Biden’s ‘legacy shadow’,” he wrote.
Some economists have made similar analyses to Navarro. Belgian economist Paul De Grauwe told Newsweek, “The decline in first-quarter GDP is mainly due to the surge in imports triggered by impending tariffs, which is a temporary effect. If consumers and businesses continue to be pessimistic, consumer spending will decrease.”
Another report released by the U.S. Commerce Department on Wednesday showed that consumer spending in March was the strongest this year, with a significant increase in car sales. This is because many families wanted to buy cars before tariffs were implemented.
Additionally, despite the overall economic contraction, business fixed investment grew by 9.8%, indicating that American companies are increasing capital investment, which will lead to long-term improvements in productivity and employment.
Shannon Grein, an economist at Wells Fargo, also pointed out, “The headlines overstated the softness of the data, as much of it was due to early imports triggered by tariffs. Overall, the demand appears relatively robust.”
However, some economists still express concerns over the new economic data. Moody’s Chief Economist Mark Zandi commented that while the GDP report may indeed exaggerate economic weakness, the performance is indeed weaker. Slowdowns in consumer spending, a decrease in federal government spending, and a drop in consumer confidence in April are all “worrisome.”
As the situation unfolds, different perspectives on the economy emerge, painting a complex picture of the current economic landscape.