April 30, 2025

May 01, 2025

This morning the Bureau of Economic Analysis released a report showing an abrupt reversal in the U.S. economy. Gross domestic product (GDP), which measures the total market value of goods and services, shrank from a healthy 2.4% in the last quarter of 2024 to -0.3% in the first quarter of 2025. The shift is the first time in three years that the economy has contracted. The slump appears to have been fueled by a surge in buying overseas goods before Trump’s tariffs hit.

The stock market plunged on the news. Although it would recover later in the day, the stock market during President Donald Trump’s first 100 days in office has been the worst since the administration of Richard Nixon. Today Trump posted on his social media site: “This is Biden’s Stock Market, not Trump’s. I didn’t take over until January 20th. Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers. Our Country will boom, but we have to get rid of the Biden “Overhang.” This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers, but when the boom begins, it will be like no other. BE PATIENT!!!”

Observers noted that in January 2024, when the stock market was booming under Biden, Trump took credit for it, posting: “THIS IS THE TRUMP STOCK MARKET BECAUSE MY POLLS AGAINST BIDEN ARE SO GOOD THAT INVESTORS ARE PROJECTING THAT I WILL WIN, AND THAT WILL DRIVE THE MARKET UP.”

Trump held a televised two-hour Cabinet meeting today, at which administration officials sat behind red MAGA hats and praised him so extravagantly that right-wing commentator Ann Coulter posted: “Would it be possible to have a cabinet meeting without the Kim Jong il–style tributes?” He blamed Biden for the contracting economy and told reporters that “you could even say” that any downturn in the second quarter is Biden’s fault, too. The White House put out an official statement blaming former president Joe Biden for today’s report of the shrinking GDP and saying the country’s underlying economic numbers remain strong.

In fact, Biden left behind an economy that The Economist called “the envy of the world,” showing on the cover of the October special issue about the U.S. economy a roll of $100 bills blasting off into space. As Simon Rabinovitch and Henry Curr wrote in that issue, the U.S. had “left other rich countries in the dust.” “Expect that to continue,” the headline read. In Biden’s four years, the U.S. had added 16 million jobs, unemployment was at its lowest rate in 50 years, real wages for the bottom 80% of Americans were increasing, and inflation levels had come down almost to the Federal Reserve’s target from their highs during the post-shutdown shocks.

The pain from Trump’s tariffs has already hit agriculture as China has largely stopped buying American products, from pork and soybeans to lumber. Peter Friedmann, executive director of the Agriculture Transportation Coalition, a leading export trade group for farmers, told Lori Ann LaRocco of CNBC that the sector is already in “full-blown crisis” as farmers have sustained “massive” financial losses.

Economists expect the confusion and uncertainty of Trump’s tariffs to hurt growth more broadly in the second quarter of 2025 as container ships from China stop arriving in the U.S. in early to mid-May, about a month after Trump’s April 2 “Liberation Day” imposed a 145% tariff on goods from that country. Executive Director Gene Seroka of the Port of Los Angeles told CNBC’s Squawk Box yesterday that beginning next week, shipping volume at the port will drop over 35%. Executive Director of the Port of Oakland, California, Kristi McKenney noted that the lack of import trade will hurt exports as well, endangering the jobs of dockworkers, warehouse workers, and truck operators.

The East Coast ports will see similar drops a couple of weeks after the West Coast ports. United Parcel Service (UPS) has already announced that it is laying off about 20,000 employees and closing 73 of its buildings by the end of June. It says it anticipates lower volumes of shipping from its largest customer, Amazon, because of the tariffs.

Economists expect the lack of goods from around the globe, especially from China, to create shortages and higher prices. Notably, the tariffs will hit toys and Christmas items. China produces 80% of the toys sold in the U.S. and 90% of the Christmas goods. Ordering of inventory for the holidays is normally underway by now, Daisuke Wakabayashi of the New York Times reports, as it takes four to five months to make, package, and ship products to the U.S. from China. But currently the tariffs have shut down that trade.

Trump seemed to acknowledge that today when he said: “Well, maybe the children will have two dolls instead of 30 dolls, you know? And maybe the two dolls will cost a couple of bucks more than they would normally. But we’re not talking about something that we have to go out of our way. They have ships that are loaded up with stuff. Much of which—not all of it—but much of which we don’t need.”

Ironically, the Republican Party made accusations that Biden was “ruining Christmas” a central theme of political attack in 2021, 2022, and 2023.

Chip Cutter, Bob Tita, and Stephen Wilmot of the Wall Street Journal reported yesterday that more than 80% of senior executives are worried about Trump’s tariffs and his other economic policies, and many companies say they are unable to predict future earnings. Treasury Secretary Scott Bessent says that uncertainty is strategic, intended to give the administration a leg up in negotiations.

The Constitution gave to Congress, not the president, the power to set tariffs. Trump is taking that power to himself by using the International Emergency Economic Powers Act (IEEPA) to enact his sweeping tariffs. This law authorizes a president to regulate international trade during a national emergency. On February 1, Trump declared such a national emergency to impose tariffs on China, Canada, and Mexico, and on April 2 he again invoked it for his new blanket tariffs.

Congress could end Trump’s power over tariffs by cancelling the national emergency, a step Democrats were willing to take. But Republicans in the House used a procedural rule to make sure that Democrats could not cancel that emergency. A challenge to the president’s declaration of a national emergency must come to the floor for a vote within 18 days of the challenge. The House defanged that rule by declaring that each day for the rest of the congressional session will not “constitute a day for purposes…of the National Emergencies Act.”

In the Senate this evening, Republican leaders killed a similar Democratic measure. Senate majority leader John Thune (R-SD) said: “Republicans are trying to give the administration…some space to figure out if they can get some good deals and awaiting the results of that.” Three Republican senators—Susan Collins of Maine, Lisa Murkowski of Alaska, and Rand Paul of Kentucky—voted with the Democrats.

Other observers are less hopeful of a good outcome for Trump’s tariffs. Washington Post legal and economic columnist Natasha Sarin said: “It’s just totally bonker bananas. Where are we going?! Are we near trading deals with India and Japan? That means less tariff revenue. But Stephen Miran, chair of the White House Council of Economic Advisers, says the tariffs are going to produce lots of revenue for deficit reduction. So that must mean they’re staying high? It’s a constant yo-yo that is impossible to plan around and is leading to investors being down on America, and with good reason.”

“Bonker bananas” is an apt description for an interview Trump did last night with Terry Moran of ABC News. In a discussion of Kilmar Abrego Garcia, the Maryland man the administration rendered to prison in El Salvador because of “administrative error,” Trump insisted that Abrego Garcia has “MS13” tattooed on his knuckles, for the gang Mara Salvatrucha, or MS-13. But the photo Trump held up for the cameras as “proof” of MS-13 tattoos was obviously photoshopped with letters and numbers apparently intended to be labels for Abrego Garcia’s actual tattoos.

As Moran repeatedly told Trump that the tattoos had been photoshopped, Trump got visibly angry, first suggesting that it was thanks to Trump that Moran got the interview, and complaining that “you’re not being very nice.” Trump then continued to insist that Abrego Garcia has MS13 tattooed on his knuckles and said that Moran’s refusal to agree to that “is why people no longer believe the news…. It’s such a disservice,” the president said. “Why don't you just say yes, he does[?]”

Trump couldn’t let it go. He brought it up again later in the interview, calling Moran “dishonest” for saying the tattoos were photoshopped.

Abrego Garcia has no criminal record, and experts on MS-13 say his tattoos are not tied to the gang.

That was not the only astonishing moment in the interview.

Although the Supreme Court unanimously agreed with a lower court that the administration must work to get Abrego Garcia back from El Salvador, the White House has insisted that it cannot comply because only El Salvador’s president, Nayib Bukele, can release Abrego Garcia. But when Moran said to Trump he could pick up the phone and get him back, Trump replied “I could…. And if he were the gentleman that you say he is, I would do that.” When Moran replied “But the court has ordered you to facilitate that,” Trump replied: “I'm not the one making this decision. We have lawyers who don't want to do this.”

“You’re the president!” Moran replied.

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Notes:

https://www.bea.gov/news/2025/gross-domestic-product-4th-quarter-and-year-2024-third-estimate-gdp-industry-and

https://apnews.com/article/economy-trump-gdp-tariffs-inflation-trade-28a0da24c803c4796eb32704cd0244cc

https://finance.yahoo.com/news/live/stock-market-today-dow-sp-500-nasdaq-come-back-from-steep-lows-after-gdp-print-to-cap-turbulent-april-200112050.html

https://www.washingtonpost.com/opinions/2025/04/21/trump-tariff-recession/

https://www.cnbc.com/2025/04/29/port-of-los-angeles-sees-shipping-volume-down-35percent-next-week-as-tariffs-bite.html

Donald J. Trump, Truth Social post, April 30, 2025, 9:13 a.m.