US GDP Stumbles for First Time in 3 Years—Tariffs Finally Bite
Wall Street’s favorite recession indicator just flashed red. The US economy shrank last quarter—first contraction since 2022—as years of trade wars finally catch up.
Economists: ’We told you so’ (but quietly, lest they lose their Bloomberg terminals)
The numbers don’t lie: Protectionism always comes due. Now watch the Fed try to spin this as ’transitory’ while quietly prepping the money printers.
Bottom line
-
Overall health: Weakening. Output contracted, demand slowed sharply, profits fell, and jobless claims are edging up.
-
Inflation backdrop: Inflation is still too hot. Price gauges moved further above the Fed’s target, limiting room for near-term rate cuts.
-
Policy implication: The Fed is likely to keep its “higher for longer” stance until it sees both cooler inflation and clearer labour-market slack.
-
Forward look: High-frequency trackers (Atlanta Fed GDPNow at 2.2 % for Q2) point to a mild rebound, but that estimate has been slipping and could weaken further if layoffs broaden or tariffs bite again. Persistently soft consumer spending and falling profits raise the odds that today’s contraction is the first chapter of a longer slowdown rather than a one-off blip.
