The GDP and PCE data for the first quarter of the United States, released the night before last, shows that the year-on-year growth rate of GDP is only -0.3%, far below market expectations, making it feel like the U.S. economy is cooling down. Moreover, the PCE data is also ridiculously high, with inflationary pressures still rising. However, strangely, the market only experienced a slight decline and did not crash. What’s going on? Let’s break it down piece by piece.

First, why is the GDP so poor? Is this really a signal of recession? The annualized growth rate of the U.S. real GDP in the first quarter is only -0.3%, which is not only far lower than market expectations but also much worse than the previous quarter. From the data, it indeed feels like the economy is in trouble. However, looking a bit deeper, there is a key indicator called domestic private final sales, which reflects domestic demand in the U.S., and it has grown at an annualized rate of 3%. What does this mean? Simply put, people are still spending money, businesses are still purchasing equipment and building, and real estate investment hasn’t stopped. Domestic demand in the U.S. remains fairly stable, and the economic foundation hasn’t collapsed. So why is the GDP so terrible? The culprit is Trump’s tariff policy. Tariffs have caused import costs to skyrocket, disrupted supply chains, and directly dragged down economic growth. In the first quarter, imports surged, dragging down GDP by a staggering 5.03%. Why did imports soar? Because businesses are trying to stock up! They are worried that tariffs will be even higher after Trump takes office, making costs more expensive, so they are desperately hoarding raw materials.

Trump himself couldn't sit still and publicly stated that the fluctuations in the stock market are problems left behind by Biden, attempting to shift the blame.

In summary, we are not yet at the point of widespread pessimism about the U.S. economy. The U.S. consumption growth rate remains around 3%, which is at the historical average level, indicating that people are still spending money. Since they are still spending, it suggests that the domestic situation is not as fragile as we might think, and the economic foundation is still quite solid.