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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Trump claims shrinking US economy ‘nothing to do with tariffs’ as GDP drop raises risk of recession – as it happened

Economy China France GDP Recession United States Donald Trump Insee
The Port of Los Angeles in San Pedro, California, this month
The Port of Los Angeles in San Pedro, California, this month Photograph: Patrick T Fallon/AFP/Getty Images

Closing post

Time to wrap up…

The US economy shrank in the first three months of Donald Trump’s second term as the president sought to roll out an aggressive trade strategy, claiming that sweeping tariffs on the world would strengthen the US economy.

Gross domestic product (GDP), a key measure of overall growth in the US economy, fell by 0.3% in the first quarter of the year, on an annualised basis, down from 2.4% in the last quarter of 2024. The contraction – the first since the start of 2022 – puts the US on the brink of a technical recession, defined by two quarters of negative growth.

The drop in activity comes amid a huge fall in consumer sentiment, which in April dropped 32% to its lowest level since the 1990 recession.

Trump spent much of the first quarter threatening, and fleetingly implementing, sweeping tariffs on Canada and Mexico, and targeting China with higher duties on its exports.

Here’s the full story:

Economists blamed the fall in GDP on a surge of imports in the quarter, which subtracted from growth.

Trump, though, has blamed the “Biden “Overhang”” adding, this has “NOTHING TO DO WITH TARIFFS”.

His trade advisor, Peter Navarro, claimed it was the best negative GDP print he had seen.

Wall Street investors are unimpressed, though, as the S&P 500 share index is down 1%.

The UK’s FTSE 100 index, though, has posted a 13-day winning run.

The US GDP report capped a busy data for economic data, with both France and Germany returning to growth, helping the eurozone to expand by 0.4% in the January-March quarter.

FTSE 100 extends its winning run to 13 days

The UK’s stock market’s winning run has continued today, despite disappointment over the US growth report.

In London, the FTSE 100 share index has closed 31 points higher tonight at 8494 points.

That’s its highest closing level since 2 April, just before Donald Trump announced his new ‘Liberation Day’ tariffs.

It means the index has now risen for 13 days in a row, the longest run of gains since January 2017 when it posted a 14-day winning run.

David Page, head of macro research at AXA Investment Managers, suspects that optimism over Donald Trump’s election win lifted business investment in the last quarter.

Here’s his take on the drop in GDP in Q1:

  • Q1 GDP contracted by 0.3% (seasonally adjusted and annualised) the first contraction in 3 years.

  • • Contraction was driven by a surge in imports, with net trade stripping 5.5 percentage points (ppts) off the annualised growth rate.

  • • Consumer spending was firmer than expected and suggests an even bigger pre-tariff march surge than forecast.

  • • Investment was also strong, we think reflecting Trump-election optimism, with trade uncertainty paralysis only creeping in over coming quarters.

  • • Although domestic final sales spending was more constant (2.3% vs 2.9% in Q4), we would not consider this an ‘underlying’ pace of growth.

  • • GDP is likely to be volatile over coming quarter and we expect a rebound in Q2.

  • • However, from the second half of the year (H2 2025) we expect more consistently weak output.

  • • For now we forecast GDP slowing to 1.6% in 2025 and 0.6% in 2026.

Greensill administrator to sue Lex Greensill

Back in the UK, there’s been a development in the long-running Greensill case - the collapsed finance group on whose behalf a lobbying campaign by former prime minister David Cameron was found to have shown a “significant lack of judgment”.

The administrator of Greensill Capital (UK) has filed a high court claim against six former directors - plus founder Lex Greensill - claiming a “breach of fiduciary duty”.

That basically means they are alleged not to have acted in the company’s best interests.

There are few further details, as the claim documents have yet to be made public on the high court’s electronic system. Meanwhile, Grant Thornton, the administrator of the company, declined to comment - a stance seemingly mirrored by the defendants.

When the Guardian rang Lex Greensill’s mobile phone number and asked to speak to the businessman, a male voice answered and asked: “Who’s this?”

After hearing it was the Guardian calling, the voice replied: “I don’t have anything to say to you”.

The line then went dead.

Updated

Despite Peter Navarro’s breezy optimism about the fall in US GDP, and Donald Trump’s attempt to pin the blame on Joe Biden, the big picture is that America’s economy fell behind major rivals in the first quarter of this year.

The 0.3% annualised fall in US GDP is equivalent to a quarter-on-quarter contraction of almost 0.1% – weaker than most countries in the eurozone.

Following today’s growth figures from Europe, here’s what we know.

  • Ireland: GDP grew by 3.2% in Q1

  • Spain: grew by 0.6%

  • Eurozone: grew by 0.4%

  • Italy: grew by 0.3%

  • Germany: grew by 0.2%

  • France: grew by 0.1%

  • US: shrank by 0.075% (or -0.3% annualised)

  • Hungary: shrank by 0.2%

We don’t yet have Q1 GDP data from Japan, the UK or Canada, so we can’t say how far down the G7 growth league the US has fallen.

Updated

The Canadian economy contracted by 0.2% in February, on decreases in mining, quarrying, and oil and gas extraction, as well as transportation and warehousing, Statistics Canada said on Wednesday.

March GDP was most likely up 0.1%, while first quarter GDP was likely up 1.5% on an annualized basis, the agency said in a flash estimate.

Democratic senator Chuck Schumer is urging Donald Trump to fire his economic team and change his plans, following the drop in GDP in the first quarter of 2025.

Posting on X, Schumer says:

Americans who hired Donald Trump for the economy must be ready to fire him now.

Today’s GDP number shows Donald Trump is running America the same way he ran his business—straight into the ground.

This decline in GDP is a blaring warning to everyone that Donald Trump and Congressional Republicans’ failed MAGA experiment is killing our economy.

Donald Trump must admit his failure and reverse course, and immediately fire his economic team.

Navarro: Best fall in GDP I've ever seen

White House senior trade adviser Peter Navarro has claimed that today’s US GDP report is actually encouraging.

Speaking to CNBC, Navarro declares that the report is “the best negative print I have ever seen in my life.”

Market need to “look beneath the surface”, Navarro continued, citing a 22% increase in domestic investment which he boasts is “off the charts”.

Navarro, one of the architects of the Trump trade policy, then declares that if you strip out inventories and “the negative effects of the surge of imports because of the tariffs” you have 3% growth, adding;

We really like where we’re at now.

Harvard economist Jason Furman also calculated the 3% annual growth rate figure, which he defines as “core GDP”.

Updated

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The sharp slowdown in the US economy in Q1 puts “enormous” pressure on America’s central bank to cut interest rates, argues Professor Costas Milas, of the University of Liverpool’s Management School.

He tells us:

Although the latest GDP reading in the U.S. is not good for Trump’s administration, quite paradoxically it might work for Trump. Trump has repeatedly pressed Fed Chair Jerome Powell and the Fed for interest rate cuts. Although the latest GDP drop has largely to do with Trump’s uncertain policies, it definitely justifies an interest rate cut as early as next week.

This is because the latest GDP drop will create “negative momentum” (the so-called carry over effects) for future GDP readings. Quite frankly, today’s GDP reading will add enormous pressure for the Fed to cut interest rates next week.

Trump has been pushing the Federal Reserve to cut rates, arguing that Fed chair Jerome Powell was acting too slowly.

Photos: Gloomy faces on Wall Street

Almost all of the 30 stocks on the Dow Jones industrial average are in the red in early trading, as the sell-off gathers pace.

The DJIA is now down 706 points, or 1.7%, at 39,821 points, as the GDP report casts a cloud over Wall Street.

Amazon (-3.82%) are the top faller, followed by Nike (-3.8%) and Nvidia (-3.5).

Only Verizon (+1.4%) is bucking the trend, showing its face in the risers column.

Updated

Wall Street drops in early trading

Wall Street’s main indexes have opened lower after data showed the world’s largest economy contracted in the first quarter.

The Dow Jones Industrial Average fell 237.2 points, or 0.59%, at the open to 40,290.41, as traders digest warnings that President Donald Trump’s tariff policies are hurting the US economy.

The S&P 500 fell 61.4 points, or 1.10%, at the open to 5,499 points​, while the Nasdaq Composite dropped 361.3 points, or 2.07%, to 17,099 points.

Economics professor Justin Wolfers makes a good point – today’s US GDP report is hard to interpret, due to the impact of Donald Trump’s policies.

He adds that there’s a “substantial chance” that the National Bureau of Economic Research (NBER) will at some point declare the US fell into recession in 2025.

A ‘Trump recession’ has just moved closer, warns Garry White, chief investment commentator at investment manager Charles Stanley.

The US economy contracted in the first quarter of the year, mainly due to Donald Trump’s trade policy. Details of the administration’s policy were announced after the quarter end, so the data does not represent the scale of the levies that caused so much shock in global markets, merely the anticipation. There was a more technical reason for the contraction – a surge in imports ahead of the expected introduction of tariffs.

These are a subtraction when the GDP figure is being put together. It is in the upcoming quarters where we will start to see the real impact of President Trump’s policy on the economy. Nevertheless, the figures mean a “Trump recession” has just got closer to hand.

Trump: this has "NOTHING TO DO WITH TARIFFS"

Donald Trump is trying to deflect blame for the fall in US GDP, and the recent stock market turmoil.

In a post on his Truth Social website, the US president says:

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!!!

To be clear, though – the fall in US GDP in the last quarter is due to a large increase in imports since the start of the year, which drove the US trade deficit to a record high. That increase has been widely attributed to the new president’s trade war, as US companies have ordered more goods from abroad before tariffs kicked in.

And as for ‘bad numbers’, the US economy grew at a decent 2.4% per year rate in Joe Biden’s final full quarter in the White House.

[Incidentally, economics writer Noah Smith recently wrote a good explanation about how GDP data treats imports, here]

Capital Economics also predict that the US will avoid a recession (or “Trumpcession”, as it would be coined), by returning to growth in the current quarter.

That’s because the jump in imports which hit GDP in Q1 will probably reverse in Q2, as tariffs dampen demand for overseas goods.

Updated

Today’s US GDP report may also show the impact of Elon Musk’s Department of Government Efficiency (DOGE), which has been slashing services in an cost-cutting spree.

Capital Economics’s chief North America economist, Paul Ashworth, explains:

The 0.3% annualised decline in first-quarter GDP was entirely due to a pre-tariff 41.3% annualised surge in imports, with net exports subtracting a massive 4.8% points from GDP. This surge now appears to be going into reverse, however, and should boost second-quarter GDP.

The decline in first-quarter GDP was actually smaller than the 2.0% contraction we were expecting following the big jump in goods imports in March reported yesterday. As it turns out, although it didn’t show up in the monthly data, that surge in imports was partly offset by a much bigger-than-expected 2.3% point boost from stronger inventory accumulation.

The other weakness came from the DOGE crackdown, with Federal spending falling by 5.1% annualised.

Updated

Wall Street futures hit by fall in GDP

US stock index futures have fallen as investors digest the fall in US GDP in the first quarter of this year.

The S&P 500 share index of US companies is on track to fall by over 1%, with the tech-focused Nasdaq down 1.6% in pre-market trading.

European stock markets have dropped since the US GDP data was released; in London, the FTSE 100 share index is down 21 points, or 0.25% - on track for its first daily fall in over two weeks.

US economy shrinks: what the experts say

On Donald Trump’s 101st day in office, we are just now beginning to see “the true impacts” of his policies on the US economy, says Lindsay James, investment strategist at Quilter.

James explains:

While it does not quite cover the fallout of his ‘Liberation Day’, today’s US GDP data still clearly illustrate what has been a turbulent first quarter of the year for the US, as well as the advance measures that were taken by businesses in an attempt to mitigate the impacts of his tariffs.

“Thanks in part to companies stockpiling imports ahead of the implementation of Trump’s tariffs, resulting in a significant imbalance between imports and exports, the 0.3% contraction reported today comes as no surprise. The Atlanta Fed’s GDPNow estimate for Q1 pointed to an annualised contraction of as much as 2.7%, so it seems the downturn is not as severe as it could have been. However, given it is only the first reading, there is a chance it could be revised down further yet.

A clearer picture of the underlying demand from consumers comes from the real final sales to private domestic purchases, which grew 3%; a solid outcome with a slight increase on the 2.9% seen in Q4.

James adds that US consumer sentiment has “tanked”, and the global economy is in a very different place than it was just a few short months ago, which may encourage businesses to pause investment and expansion plans until the outlook is less hazy.

Jochen Stanzl, chief market analyst at CMC Markets, says the long-predicted slowdown in the US economy has indeed materialized in today’s GDP figures.

“Today’s figures are at once revealing and inscrutable. They illustrate the considerable turmoil into which the US economy has plunged, compelling importers to build up inventories in order to evade forthcoming tariffs. Yet they offer scant guidance on how growth might evolve from here.

The long-predicted slowdown in the US economy has indeed materialized. Since the fourth quarter, growth has plunged—a decline that belies underlying fundamentals, as many firms merely brought forward imports ahead of anticipated tariff measures. Consequently, the merchandise trade deficit swelled to a record $162 billion—an anomaly unlikely to recur this quarter.

Although the precise extent to which tariffs will dampen growth remains unclear, the prevailing view is that the trajectory will be downward rather than upward.

US economy contracts: the key charts

This chart show how growth fizzled out across the US economy in the first quarter of this year, following solid growth in previous quarters:

While this chart shows how the jump in imports dragged GDP down:

US economy shrank in first quarter

Newsflash: The US economy shrank in the first quarter of this year, putting America on the brink of a technical recession.

US GDP shrank at an annualised rate of 0.3% in January-March, new data shows – a blow to the Trump White House as they celebrate the first 100 days of the president’s second term.

The fall in GDP was, as feared, driven by a surge in imports into the US, as American companies tried to front-run new tariffs.

A drop in government spending was also responsible.

The US Bureau of Economic Analysis explains:

The decrease in real GDP in the first quarter primarily reflected an increase in imports, which are a subtraction in the calculation of GDP, and a decrease in government spending. These movements were partly offset by increases in investment, consumer spending, and exports.

That means the US is halfway into a ‘technical recession’ – defined by economists as two quarterly contractions in a row.

But in the US, the official judge of recessions is the National Bureau of Economic Research (NBER), who declares a downturn after studying a range of evidence.

The data covers the last three weeks of Joe Biden’s presidency, before Donald Trump’s inauguration on 20 January.

February and March were dominated by trade war fears, as the new president announced tariffs on China, Mexico and Canada, before his ‘Liberation Day’ announcement of wider levies on 2 April.

Updated

US private sector job growth slows

Newsflash: Hiring by US companies has slowed sharply this month, according to the latest private payroll data.

Payrolls operator ADP has reported that private sector employment increased by 62,000 jobs in April, much weaker than the 115,000 new hires which economists expected.

That’s also lower than in March, when ADP reports that 147,000 new jobs were created.

Dr. Nela Richardson, chief economist at ADP, economic uncertainty is making it hard for businesses to take on staff:

“Unease is the word of the day. Employers are trying to reconcile policy and consumer uncertainty with a run of mostly positive economic data.

“It can be difficult to make hiring decisions in such an environment.”

ADP reports that education and health services, information, and professional and business services lost jobs this month.

Goods-producing firms added 26,000 workers, with the services sector hiring 34,000.

GSK 'well-prepared' for Trump tariffs

British pharma company GSK said it was “well-prepared” for any possible tariffs imposed by Donald Trump on the pharma sector.

“As far as tariffs are concerned, we start from a position of strength,” GSK’s chief executive Emma Walmsley told reporters as the company announced its first quarter results.

Walmsley said:

“Obviously there’s still some fluidity here. We’re watching it very carefully, but we are well-prepared, have been working on that for some time, to navigate and mitigate.”

The pharma sector has been holding its breath in the face of threatened tariffs from the US. The sector has been largely exempt from duties under a 1995 World Trade Organization (WTO) agreement, designed to keep medicines affordable.

Walmsley made clear that the US was GSK’s “number one market” for investment as well as for “innovation commercially ... where we invest in R&D ... in manufacturing” and in business development.

She said GSK had “reset” its supply chain in 2022 when it separated its consumer healthcare business from the rest of the group to form Haleon, a separate listed company, rather than responding to the threat of tariffs.

She added:

“When we went through the demerger, there was an enormous amount of work to make very intentional, deliberate choices to reset our supply chain for regional resilience and dual sourcing and quite a bit of flexibility.”

GSK broke ground on its sixth factory in the US earlier this month, she said.

It came as the company reported a 4% rise in sales in the first three months of the year to £7.5bn, ignoring currency movements, and reconfirmed its guidance for the rest of the year.

All eyes on US GDP coming up soon....

Tension is building in the markets are investors await the first estimate of how the US economy fared in January to March this year.

The official estimate of US GDP for Q1 2025 is due in just under 30 minutes (8.30am on the East coast of the US, or 1.30pm in the UK).

The data is expected to show a slowdown – or worse – across the US economy over the quarter. Estimates range from annualised growth of 1.7%, to an annualised contraction of 1.5%.

If GDP falls, then the US would be on the brink of a technical recession (defined as two quarters of negative growth in a row).

The US expanded by 2.4% per year in the final quarter of 2024.

There’s concern that a surge in imports in the last quarter could weigh on growth, after data yesterday showed the US trade in goods deficit widened sharply in March.

Analysts at French bank BNP Paribas have revised down their estimate for US Q1 real GDP growth to -0.6% quarter-on-quarter, from a previous forecast of +0.4%, “mainly due to March data showing a wider goods trade deficit”.

Updated

Caterpillar has also flagged that tariffs could hurt its sales this year.

Reuters has the details:

The industrial giant gave investors two different scenarios for its annual forecast, in a sign of how difficult it was for companies to plan around U.S. President Donald Trump’s chaotic tariff policies.

Shares of Caterpillar rose 1.5% in premarket trading, after the company forecast an improvement over its prior expectations under a scenario that excluded tariff impact.

Including tariffs, Caterpillar said it expects annual sales and revenue to be slightly down from 2024, but in line with its prior expectations.

The company said it expects an additional tariff-related cost headwind of between $250 million and $350 million in its second quarter.

Moody’s Analytics fears that eurozone growth will all-but fizzle out in the second half of 2025.

Following the 0.4% rise in GDP in the first quarter, Kamil Kovar, associate director and senior economist at Moody’s Analytics,says:

“Today’s eurozone GDP numbers confirmed the region’s economy is in a relatively solid state as it enters choppy waters. Output rose 0.25% in the first quarter if we exclude volatile Irish data, and 0.35% when those are included.

Growth was likely driven by private consumption, while inventories also contributed to the increase, and net exports were a drag. The start of the tariff war in April will heavily weigh on economic activity. We expect a slowdown in the second quarter and almost no growth in the year’s second half.

Construction equipment maker Caterpillar has reported a sharp drop in sales in the last quarter.

Caterpillar, seen as a bellwether to the health of the global economy, has reported a 10% drop in sales and revenues for the first quarter of 2025 to $14.2bn.

The firm, which makes diggers, bulldozers and trucks, also missed profit expectations. It has blamed changes in dealer inventories, a sign that its customers cut back in anticipation of weaker demand.

Co-op forced to shut down part of IT system after hack attempt

The Co-op has been forced to shut down parts of its IT system after discovering an attempted hack only days after the fellow retailer Marks & Spencer faced a serious cyber incident.

In a letter to staff sent on Tuesday and seen by the Guardian, the mutual said it had “taken steps to keep systems safe” so had “pre-emptively withdrawn access to some systems for the moment”.

The group owns more than 2,000 grocery stores, and more than 800 funeral parlours as well as legal and financial services businesses.

It said the measures to protect its systems included the shutdown of some business services for teams running stores and its legal services division.

The Co-op said all its stores, including rapid home deliveries, and funeral homes were trading as usual.

Anxiety over the economic outlook is weighing on the oil price, at the end of its worst month in over three years.

US crude has dipped below the $60/barrel level for the first time since 11 April this morning, down almost 1% today.

Brent crude is down a similar amount, at $63.66/barrel.

So far this month, Brent and WTI have lost around 15% and 16%, respectively, the biggest percentage drops since November 2021.

Harry Woolman, analyst at Validus Risk Management, agrees that the eurozone economy benefitted from a jump in activity ahead of the new US tariffs:

“Eurozone Q1 GDP data – released this morning – came in above expectations at 0.4% quarter-on-quarter versus 0.2% forecasted. The release will lend some near-term relief to European policymakers, who have had to contend with heightened volatility on the back of tariff uncertainty.

Worth noting that this morning’s print also captures the period immediately prior to Donald Trump’s ‘Liberation Day’ on 2nd April, thus, the positive news has to be taken with a grain of salt. Likely, growth is being front loaded amid tariff headwinds, with consumers and importers bringing forward consumption ahead of the implementation of reciprocal levies.”

Recent cuts to eurozone interest rates helped the economy beat expectations in the last quarter, says Sam Miley, Managing Economist and Forecasting Lead at the Centre for Economics and Business Research.

“The Eurozone economy surpassed expectations in Q1, with growth accelerating to 0.4%. This expansion was likely supported by the European Central Bank’s ongoing monetary loosening, as well as exporters increasing activity prior to the implementation of tariffs from the US.

Despite the stronger performance in Q1, the outlook for the currency bloc remains weak, driven by geopolitical uncertainty and poor domestic demand conditions. Cebr projects the Eurozone economy to grow by just 0.8% this year, far below its long-term trend.”

Veteran emerging-markets investor Mark Mobius has revealed that most of his holdings are currently in case.

Mobius is keeping to the sidelines while trade war-related uncertainty rumbles on.

He told Bloomberg TV today:

“At this stage, cash is king. So 95% of my money in the funds are in cash.

Right now, we’ve got to keep the cash and be ready to move when the time is right.”

Xi says China's economy should adapt to external changes

Over in Shanghai, Chinese President Xi Jinping has called for action to adjust to changes in the international environment facing China – a nod to the US trade war.

Xi also urged policymakers to grasp strategic priorities and making sound plans for the country’s economic and social development, according to state-run news service Xinhua.

Xi made the remarks while chairing a symposium in Shanghai on economic and social development during the 15th five-year plan period from 2026 to 2030.

Xinhua reported:

The remarks came as China revs up efforts to fulfill the targets set in the 14th Five-Year Plan (2021-2025) in the final year of its implementation and to formulate the next five-year plan.

Eurozone growth rises to 0.4%

Newsflash: growth has accelerated across the eurozone in the first quarter of this year.

Eurozone GDP rose by 0.4% in the January-March quarter, twice as fast as the 0.2% growth recorded in October-December.

Statistics body Eurostat reports that Ireland (+3.2%) recorded the highest increase compared to the previous quarter – that was flattered by the activity of multinationals based in the republic for tax reasons, followed Spain and Lithuania (both +0.6%).

Hungary (-0.2%) was the only Member State that recorded a decrease compared to the previous quarter.

Taiwan's GDP boosted by pre-tariff surge in exports

Growth has surged in Taiwan, thanks to a scramble to buy its technology exports before new US tariffs came in.

Taiwan’s GDP rose at an annualised rate of 9.67% in the first three months of this year, which indicates quarterly growth of almost 2.5%.

Compared to a year ago, gross domestic product grew by 5.37%, the fastest rate since the first quarter of 2024.

The GDP report says:

Due to the strong demand for electronic information and communication products, real exports of goods and services grew by 20.11% (yoy). Imports also grew by 23.66% (yoy).

Taiwan is a major producer of semiconductors, and has benefitted from the jump in demand for high-powered chips to support artificial intelligence systems.

German economy returns to growth

Germany has followed France’s lead, and returned to growth.

The German economy grew by 0.2% in the first quarter of the year, new data shows, following a 0.2% contraction in the last three months of 2024.

Germany’s Federal Statistical Office, Destatis, also reports that household final consumption expenditure and capital formation were both higher than in the previous quarter.

However, Destatis also reports that GDP in the first quarter of 2025 was 0.4% lower than a year ago.

Here’s the details:

Gross domestic product (GDP), 1st quarter of 2025:

  • 0.2% on the previous quarter (price, seasonally and calendar adjusted)

  • -0.4% on the same quarter a year earlier (price adjusted)

  • -0.2% on the same quarter a year earlier (price and calendar adjusted)

Italy beats forecasts with 0.3% growth

The Italian economy grew by 0.3% in the first quarter from the previous three months, preliminary data shows.

That’s slightly stronger than the 0.2% growth expected by economists.

On a year-on-year basis, first quarter gross domestic product in the euro zone’s third largest economy was up 0.6%, national statistics bureau ISTAT said.

ISTAT reports that agriculture, forestry and fishing and industry all grew, while services stagnated.

As in France, inventory building added to GDP while trade made a negative contribution.

Thailand cuts interest rates in face of trade war

Thailand’s central bank has cut interest rates, in a sign of concern that the US trade was could hurt its economy.

The Bank of Thailand’s monetary policy committee voted 5-2 to reduce the one-day repurchase rate by a quarter of one percentage point, to 1.75%, the lowest level in two years.

The central bank warned that the Thai economy is projected to expand at a slower pace than anticipated, with more downside risks due to uncertainty in major economies’ trade policies and a decline in the number of tourists.

Announcing today’s decision, it explained:

The U.S. trade policies and potential retaliations from major economies will cause significant changes in the global economic, financial, and trade landscape. This process is only beginning and subject to high uncertainties, with the global economy likely to grow at a slower pace.

The situation is expected to be prolonged, leading to structural changes and lower efficiency in global trade and production. The unpredictable nature of future global trade policies of major economies continues to pose significant challenges in assessing the economic and inflation outlook going forward.

Aston Martin limits imports to US due to Trump tariffs

The British sportscar maker Aston Martin is limiting imports to the US in the face of Donald Trump’s tariffs.

Aston Martin, known for producing the cars driven by James Bond in the spy films, said it was “currently limiting imports to the US while leveraging the stock held by our US dealers”.

The US is the key market for the lossmaking carmaker, which generated about a third of its £1.6bn revenue for 2024 in the country. It said on Wednesday it was “carefully monitoring the evolving US tariff situation” and would “respond to changes in the operating environment as they materialise”.

Fellow carmakers Stellantis and Mercedes have withdrawn their financial guidance for the year this morning, blaming the uncertainty around changing US policy on import levies.

Barclays bank has set aside more cash for bad debts due to worries over the US economy and a mounting global trade war.

Its latest financial results show that Barclays has increased its provisions for loans expected to turn sour to £643m, up from £513m. This was largely due to £74m put by for “elevated US macroeconomic uncertainty”.

Barclays says:

The Group continues to monitor the heightened uncertainty in the near-term macroeconomic outlook, especially in the US.

The bank also reported a 19% rise in pre-tax profits to £2.72bn for the three months to March 31.

Finland’s economy has managed modest growth in the last quarter.

Gross domestic product in Finland rose by 0.1% in January to March from the previous quarter, the country’s statistics office reported this morning.

ING: US tariffs will delay France's rebound

France’s economy is likely to “flirt with stagnation” throughout the year, despite the small rebound in GDP in the last quarter, predicts Dutch bank ING.

Charlotte de Montpellier, ING’s senior economist for France and Switzerland, explains:

The additional customs duties in the US and their direct and indirect impact will delay the French economy’s rebound. We estimate that the direct effect of a permanent 10% import duty in the US on French GDP (via a reduction in exports) will be around -0.1%.

Adding to this are the effects of uncertainty, the global economic slowdown and more restrictive fiscal policy, all of which will weigh on French economic activity throughout the year. The cooling in the labour market is likely to limit the recovery in household consumption, and the savings rate is set to remain high.

There’s better news from Austria, where the economy grew by 0.2% quarter-on-quarter during the first three months of 2025.

That’s according to the Wifo institute, a Vienna-based think tank. It reports that industrial production rose by 0.6%, but there was a small contraction in services and in investments.

Hungary's GDP falls

Hungary is on the brink of recession after new data showed its economy contracted in the first three months of this year.

Hungarian GDP fell by 0.2% in January-March, the country’s Central Statistical Office has reported, adding that “Industry and construction slowed the economic performance”.

That’s a blow to prime minister Viktor Orban, as Bloomberg explains:

Orban, who had pledged to voters that the economy would get off to a “flying start” this year after a recession in 2024, has had to walk back growth projections.

Under pressure to kickstart growth, Orban has announced a series of pre-election tax cuts, including expanding personal income tax exemptions to mothers and value-added tax rebates to pensioners. These, in turn, have forced the government to scrap budget targets for this year and next.

Donald Trump’s trade war has disrupted the diamond trade, according to producer Gem Diamonds this morning.

Gem, which owns the Letšeng diamond mine in Lesotho and the Ghaghoo mine in Botswana, has told the City that its sale of large diamonds scheduled for the first quarter of this year was held over “because of US tariff uncertainty”.

These goods are scheduled to be sold in the second quarter of 2025.

This delay led to a 33% drop in Gem’s sales in the last quarter, to $21.6m.

Updated

Economists are concerned that France’s economy remains weak, after it posted modest growth of 0.1% in the last quarter this morning.

Bloomberg Economics says:

“Business surveys suggest that this rebound in activity is already losing some momentum going into the second quarter. The services sector is still lagging while the manufacturing sector appears to be bracing for tariffs.

We anticipate sluggish GDP growth of 0.1% in the second quarter, as tighter financial conditions and the impact of tariffs weigh on investment. Overall, our baseline forecast is for 2025 output growth is 0.5%.”

Fund manager Mario Cavaggioni agrees that activity remains weak:

Housebuilder Taylor Wimpey has reported that the spring selling season “has progressed as expected”, despite the macroeconomic volatility triggered by the US trade war.

The company told shareholders that some customers are facing “ongoing affordability challenges”, particularly in the south of England (where prices are higher), but that it is still seeing good quality customer interest.

Over the last year, Taylor Wimpey’s sales rate has run at 0.77 per outlet per week, up from 0.74 a year earlier, with a cancellation rate of 16% (up from 13%).

Jennie Daly, chief executive, says:

“The Spring selling season has progressed in line with expectations, with good levels of customer demand reflected in our sales rate. As a result, we are today reiterating our guidance for full year UK completions excluding JVs [joint ventures] and Group operating profit.

Notwithstanding the wider macroeconomic backdrop, affordability is improving with lenders remaining committed to the housing market, albeit first time buyers continue to experience some challenges.

UK house prices dipped in April

Average UK house prices fell this month, lender Nationwide reports, after the rush to avoid an increase in stamp duty faded.

According to Nationwide, house prices fell by 0.6% in April, with the average price dropping to £270,752 from £271,316 in March.

Annual house price inflation fell to 3.4%, from 3.9% in March.

Robert Gardner, Nationwide’s Chief Economist, says this “softening” of price growth was due to the changes to stamp duty at the start of the month, which lowered the threshold for paying the tax.

Gardner adds:

Early indications suggest there was a significant jump in transactions in March, with buyers bringing forward their purchases to avoid additional tax obligations.

“The market is likely to remain a little soft in the coming months, following the pattern typically observed following the end of stamp duty holidays. Nevertheless, activity is likely to pick up steadily as summer progresses, despite wider economic uncertainties in the global economy, since underlying conditions for potential home buyers in the UK remain supportive.

China’s manufacturing activity shrinks as US tariffs bite

Factory activity across China contracted at the fastest pace in 16 months in April, a factory survey shows today, highlighting the economic impact from US President Donald Trump’s trade war.

China’s official manufacturing purchasing managers’ index has dropped to 49, the weakest level since December 2023, down from 50.5 in March.

Any reading below 50 indicates that the sector contracted.

This indicates that the flurry of tit-for-tat tariffs imposed by Washington and Beijing this month have hurt manufacturers.

Zichun Huang, China economist at Capital Economics, explains:

“The sharp drop in the PMIs likely overstates the impact of tariffs due to negative sentiment effects, but it still suggests that China’s economy is coming under pressure as external demand cools.”

“Although the government is stepping up fiscal support, this is unlikely to fully offset the drag, and we expect the economy to expand just 3.5% this year.”

Updated

Introduction: France's economy avoids recession with return to growth

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

It’s a massive day for GDP data, as growth figures from across the Eurozone – and then North America – are released through the day.

They’ll give us an insight into how the world economy fared in the first quarter of this year, a time dominated by Donald Trump’s second presidency, and the trade war that sent ripples around the globe.

And France has got us up and running, with new data showing that its economy has avoided falling into recession.

French GDP rose by 0.1% in January-March, statistics body INSEE reports. That follows a 0.1% contraction in October-December 2024, and means France has avoided shrinking for two quarters in a row (a technical recession).

But, such growth as there was came from a rise in inventories, as companies stocked up – perhaps in preparation for new tariffs. That added 0.5% to French GDP.

INSEE reports that final domestic demand and household consumption both stalled.

Investment, or “gross fixed capital formation”, shrank by 0.2%.

Foreign trade kept contributing negatively to GDP growth in the first quarter (-0.4 points after -0.1 points): exports fell sharply this quarter (-0.7% after +0.2%), while imports rose again (+0.4% after +0.5%).

We’ll hear from Germany, Italy, and the full eurozone this morning.

This afternoon, investors will be bracing for the latest US GDP report which will show how America’s economy fared under Donald Trump, as recession fears rise….

The agenda

  • 6.30am BST: France’s GDP report for Q1 2014

  • 7am BST: Nationwide’s UK house price index for April

  • 9am BST: Germany’s GDP report for Q1 2024

  • 9am BST: Italy’s GDP report for Q1 2024

  • 10am BST: Eurozone GDP report for Q1 2024

  • 12pm BST: Mexico’s GDP report for Q1 2024

  • 1.30pm BST: US GDP report for Q1 2024

  • 1.30pm BST: Canada’s GDP report for February

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