That’s because the US economy shrank at an even faster rate than initially stated in the first three months of 2023. In new data released by the Commerce Department, we learned that the GDP shrank — nationally — by an annualized rate of 0.5%. This drop happened between January and March. Even in this third and final estimate, the damage done by tariff fears on economic growth could not be overstated. In hindsight, the collapse was deeper than first forecast.
All this comes as Thursday’s release of the Commerce Department’s third estimate of GDP through the second quarter further underscored the troubling trend of the national economy. Originally, the second estimate had shown a slight decrease of 0.2% in GDP. The third estimate showed an even larger economic contraction. This is a reflection of the deep economic crisis we were all going through in those early months of the year.
This contraction largely happened during a period of intensified concern over the impact of tariffs on overall trade patterns. Analysts have pointed to these fears as having caused a deeper than expected slowdown. The down revision to -0.5% is indicative of the increasing concern among businesses and consumers about the future of our economy.
This contraction represents a substantial turnaround in economic performance. It had only been recorded at the beginning of the year. The ripple effects of such a decline can be felt across almost every industry, likely resulting in less business investment and consumer spending. Moreover, it sets a foundation for larger questions around what economic policies and comprehensive strategies will be needed to spur inclusive growth going forward.
The Commerce Department’s report serves as an important indicator for policymakers and economists as they assess the current state of the economy. The huge difference between the initial estimate and the final amount deserves a moment’s pause. This difference can initiate more detailed research and conversations into the lasting impacts of tariffs and other economic factors.