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Trump trade war blamed for surprise shrinking of US economy

Trump trade war blamed for surprise shrinking of US economy

9 News2 days ago
Your web browser is no longer supported. To improve your experience update it here The US economy shrank at a 0.5 per cent annual pace from January through March as President Donald Trump 's trade wars disrupted business, the Commerce Department reported in an unexpected deterioration of earlier estimates. First-quarter growth was weighed down by a surge of imports as US companies, and households, rushed to buy foreign goods before Trump could impose tariffs on them. The Commerce Department previously estimated that the economy fell 0.2 per cent in the first quarter. Economists had forecast no change in the department's third and final estimate. The US economy has shrunk in the last quarter, with Donald Trump's trade war blamed. (AP) The January-March drop in gross domestic product — the nation's output of goods and services — reversed a 2.4 per cent increase in the last three months of 2024 and marked the first time in three years that the economy contracted. Imports expanded 37.9 per cent, fastest since 2020, and pushed GDP down by nearly 4.7 percentage points. Consumer spending also slowed sharply, expanding just 0.5 per cent, down from a robust 4 per cent in the fourth-quarter of last year. It is a significant downgrade from the Commerce Department's previous estimate. Consumers have turned jittery since Trump started plastering big taxes on imports, anticipating that the tariffs will impact their finances directly. And the Conference Board reported this week that Australians' view of the US economy worsened in June, resuming a downward slide that had dragged consumer confidence in April to its lowest level since the COVID-19 pandemic five years ago. The Conference Board said that its consumer confidence index slid to 93 in June, down 5.4 points from 98.4 last month. A measure of Australians' short-term expectations for their income, business conditions and the job market fell 4.6 points to 69. That's well below 80, the marker that can signal a recession ahead. Former Federal Reserve economist Claudia Sahm said "the downward revision to consumer spending today is a potential red flag". Sahm, now chief economist at New Century Advisors, noted that Commerce downgraded spending on recreation services and foreign travel — which could have reflect "great consumer pessimism and uncertainty". A category within the GDP data that measures the economy's underlying strength rose at a 1.9 per cent annual rate from January through March. It's a decent number, but down from 2.9 per cent in the fourth quarter of 2024 and from the Commerce Department's previous estimate of 2.5 per cent January-March growth. The US produced less in the past quarter than in previous months. (Adobe Stock) This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending. And federal government spending fell at a 4.6 per cent annual pace, the biggest drop since 2022. In another sign that Trump's policies are disrupting trade, Trade deficits reduce GDP. But that's just a matter of mathematics. GDP is supposed to count only what's produced domestically, not stuff that comes in from abroad. So imports — which show up in the GDP report as consumer spending or business investment — have to be subtracted out to keep them from artificially inflating domestic production. The first-quarter import influx likely won't be repeated in the April-June quarter and therefore shouldn't weigh on GDP. In fact, economists expect second-quarter growth to bounce back to 3 per cent in the second quarter, according to a survey of forecasters by the data firm FactSet. The first look at April-June GDP growth is due July 30. Donald Trump
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Protest and travel mark 4th of July
Protest and travel mark 4th of July

Perth Now

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  • Perth Now

Protest and travel mark 4th of July

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Hamas has 'positive' response to ceasefire proposal

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‘I have more power': Donald Trump flexes after huge win in Congress
‘I have more power': Donald Trump flexes after huge win in Congress

News.com.au

timean hour ago

  • News.com.au

‘I have more power': Donald Trump flexes after huge win in Congress

A law that will have sweeping effects across the United States. And about as clear an expression of Donald Trump's political power as we have ever seen. Today America's House of Representatives passed Mr Trump's 'Big Beautiful Bill', the gargantuan piece of budget legislation that contains much of the President's domestic agenda. That includes the extension of tax cuts, funding for immigration enforcement measures, and cuts to Medicaid, the government program that provides health insurance for low-income Americans. It contains other stuff as well – the thing is almost a thousand pages long, after all – but those are the headline elements. Merits of the bill aside, its passage through Congress today is indisputably a political flex. While Mr Trump's Republican Party controls both the House and the Senate, in the former chamber, its majority is precipitously narrow. And enough Republican members of Congress to scupper the legislation had expressed firm opposition to it, mostly citing its projected multi-trillion dollar cost to America's already bloated federal debt. Yet after days of bickering, and grandstanding, and presumably the odd twisting of an arm behind the scenes, almost all of those members ultimately voted for it anyway. A mere two of them remained immovable in their opposition. 'Rarely have so many members of Congress voted for a measure they so actively disliked,' veteran political journalist Susan Glasser noted in The New Yorker afterwards. Speaking to the media a short time afterwards, Mr Trump was in a jubilant mood. 'You met with a lot of House Republicans yesterday. What got them to yes?' a reporter asked him on the tarmac. 'I think when you go over the bill, it was very easy to get them to a yes,' Mr Trump replied. 'Biggest tax cut in history. Great for security. Great on the southern border. Immigration is covered. We covered just about everything. It's the biggest bill ever signed of its kind.' To be clear, though, the concerns of recalcitrant Republicans were never really addressed. The bill's ballooning effect on America's deficit remains. The worries about political consequences from kicking millions of constituents off Medicaid remains. What happened here, and why it is such a demonstration of power from the President, is: a bunch of Republicans said the bill was unacceptable, Mr Trump did nothing to mollify them, and then they voted yes. In Australian terms, his argument was, 'Yeah nah, the bill is pretty good though mate.' And it worked! 'I think I have more power now. I do,' Trump said when asked about the contrast with his first term in office. That included some legislative wins, including the tax cuts that are now being extended. But Congress did defy Mr Trump on, for example, his effort to repeal the signature healthcare law of his predecessor, Barack Obama. 'You know, I could say, 'Oh gee, I don't know.' I think I probably do, because we have had the greatest record of success. 'We've proven certain things, and yeah, I think probably it's got more gravitas, more power.' Later in his exchange with the press, Trump discussed the bill's signing on Friday, US time. 'So we're signing at about five o'clock, and at about five o'clock, we're going to have B-2s and F-22s and F-35s flying right over the White House,' he said. 'And the Speaker and I and (Republican Senate Majority Leader) John Thune, we are all there together with most Republican senators and congressmen and women. 'And it's going to be a great day. So we'll be signing with those beautiful planes flying right over our heads, all right?' That puts the signing ceremony at about 7am AEST, should you wish to rouse yourself from bed on a Saturday morning to witness it. I should give you some examples of the backflipping here. Some illustrative remarks from the Republicans who crapped on the bill, then promptly turned around and voted for it. The two who did not engage in such impressive gymnastics are Congressman Thomas Massie of Kentucky, who was worried about the national debt, and Congressman Brian Fitzpatrick of Pennsylvania, who didn't like the cuts to health spending. As for the rest, we have a litany of statements contradicted by subsequent actions. Congressman Keith Self, of Texas, said Speaker Mike Johnson and the others lobbying on Mr Trump's behalf were shoving a 'broken bill down our throats'. Mr Self called it 'morally and fiscally bankrupt'. He voted yes. Congressman Ralph Norman, of South Carolina, said it would 'mortgage our future'. Mr Norman voted yes. Congressman Andy Harris, of Maryland, called it 'not ready for prime time'. Yes. California Congressman David Valadao was among 15 Republicans who signed a letter stressing they 'could not support a final bill' that threatened people's access to healthcare. He, and all 14 other signatories, voted yes. Indiana Congresswoman Victoria Spartz said the bill violated 'the minimum fiscal framework, signed by over 30 Republicans, by roughly half a trillion dollars'. Voted yes. 'If the Senate tries to jam the House with this version (of the bill), I won't vote 'present'. I'll vote NO,' said Marlyand Congressman Andy Harris. He voted yes. Congressman Andrew Clyde, of Georgia, called the national debt a serious threat to 'the security, prosperity, and future of our country', vowing to 'fight until the very end'. A few hours later, he voted yes. Over in the Senate, Missouri's Josh Hawley called the legislation's cuts to health insurance 'morally wrong'. He voted yes. Senator Mike Lee, of Utah, warned that 'the deficit will eat us alive'. He voted yes. Alaska Senator Lisa Murkowski, the most consistently anti-Trump voice left in her caucus, said the bill was 'not good enough for the rest of our nation', and expressed her hope that it would be amended by the House after being passed by the Senate. She voted yes. And had she gone the other way, the bill would have died. Nothing above includes those Republicans who fumed over the chaotic process, such as Georgia Congresswoman Marjorie Taylor Greene, who called it a 's***show'. To overcome all those objections from his own side of politics, without conceding anything? Quite the success for any politician. One last, telling example: Senator Thom Tillis, of North Carolina, who stood by his opposition to the bill's $US700 billion in Medicaid cuts and voted against it. When Mr Tillis announced his decision, Mr Trump promptly threatened to end his political career. The Senator instead chose to quit, abruptly saying he would not seek re-election. 'The choice is between spending another six years navigating the political theatre and partisan gridlock in Washington, or spending that time with the love of my life Susan, our two children, three beautiful grandchildren, and the rest of our extended family,' he said. ''It's not a hard choice, and I will not be seeking re-election.'

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