U.S. Economy Shrank as Trade Turmoil Began to Hit

Summary

WSJ What’s News: U.S. Economy Shrank as Trade Turmoil Began to Hit

Release Date: April 30, 2025
Host: Alex Osola, The Wall Street Journal

The latest episode of WSJ What’s News, hosted by Alex Osola, delves into the pressing economic challenges facing the United States as trade tensions begin to exert significant pressure on the economy. This comprehensive summary captures the key discussions, insights, and conclusions from the episode, providing a clear understanding of the current economic landscape.

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1. U.S. GDP Decline Amid Trade Turmoil

The episode opens with Alex Osola reporting that the U.S. economy experienced a contraction in the first quarter of the year, marking the steepest GDP decline since Q1 2022. The Commerce Department revealed that the GDP shrank by 0.3%, primarily due to a surge in imports driven by newly implemented tariffs.

Harriet Tory, WSJ economic correspondent, explains the implications of this decline:

“There was a big surge in imports in the first quarter, and that was a drag on growth. But if you look at the underlying measures of growth in the economy, it wasn't a dramatic weakening in underlying demand.”
(02:05)

Despite the GDP drop, underlying consumer spending, especially on services, remained resilient. However, the tariff-induced increase in import costs overshadowed these positive signs, highlighting the fragile state of the economy.

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2. Inflation Trends and Future Outlook

The discussion shifts to inflation, with the Personal Consumption Expenditures (PCE) Price Index rising by 2.3%—a figure slightly above the Federal Reserve's target of 2%. This marks the coolest inflation reading since the previous fall.

Harriet Tory provides her perspective:

“Inflation was very, very weak in March, which is a good thing after so many years of rising prices. But it's unlikely that, given tariffs, that inflation is going to continue to cool as it has in recent months.”
(03:22)

She emphasizes that tariffs are expected to exert upward pressure on prices of imported goods, potentially stalling the cooling trend in inflation. Despite strong consumer spending in March, the pervasive impact of tariffs remains a looming concern for future inflation rates.

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3. Slowing Hiring and Its Economic Impact

The conversation then turns to the labor market, highlighting a significant slowdown in hiring as reported by the ADP National Employment Report. In April, the U.S. private sector added 62,000 jobs, a sharp decline from 147,000 jobs in March—far below economists' expectations.

Harriet Tory comments on the potential fallout:

“Weakness in hiring is, of course, very bad for the economy because when people lose their jobs, they lose their incomes, they stop spending and it ripples throughout the economy.”
(04:22)

This hiring slowdown raises concerns about reduced consumer spending and overall economic momentum. The economic community is now closely awaiting the upcoming jobs report scheduled for Friday to gauge the labor market's trajectory.

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4. Impact on New Graduates and Hiring Freezes

The episode highlights the adverse effects of the hiring slowdown on recent graduates. Oyen Adedoyan, personal finance reporter, discusses how companies are retracting their hiring projections for college graduates.

“Employers were actually expected to hire more graduates this year. But now employers are saying that they expect to hire the same number of graduates as they did last year.”
(05:18)

This shift is attributed to broader economic uncertainties and hiring freezes, including within the federal government. Graduates are finding fewer entry-level opportunities, complicating their transition into the workforce.

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5. Companies Shelving Financial Guidance Amid Uncertainty

A notable trend discussed is the increasing number of companies retracting their financial guidance for the upcoming quarter. Chip Cutter, WSJ reporter, explains that firms like Stellantis, General Motors, JetBlue, Snap, and Volvo are pulling their forecasts due to economic uncertainties.

“They're all fairly worried and uncertain about where the economy goes and what's ahead.”
(07:08)

Chip attributes this hesitancy to the unpredictable nature of the Trump administration's tariff policies and fears of diminished consumer demand. The lack of clear guidance frustrates investors and adds to the market's volatility.

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6. Strategies for Navigating Uncertainty

Despite the reluctance to provide forward guidance, some companies are adopting flexible forecasting methods. For instance, United Airlines has presented multiple scenarios to accommodate different economic outcomes.

Carol Tamey, CEO of UPS, comments on the unpredictability:

“The only thing we're certain of is we don't know which, if any, of our scenarios will play out.”
(08:25)

This approach reflects a broader executive sentiment of navigating through unprecedented economic turbulence, signaling a shift towards more adaptive business strategies.

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7. Corporate Performance Amid Trade Challenges

In contrast to the broader economic struggles, certain tech giants are reporting robust financial performances. Microsoft announced double-digit revenue growth in its fiscal Q3, driven by a 21% increase in its cloud business.

Similarly, Meta Platforms (Facebook's parent company) exceeded revenue expectations with a 16% growth, alleviating concerns that tariffs would negatively impact its global digital advertising revenue.

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8. Regulatory Challenges for Tech Giants

The episode also covers the ongoing legal battles faced by major tech companies. Google CEO Sundar Pichai is actively opposing the Justice Department's measures to dismantle the company's monopoly in online search, including proposals to sell off the Chrome browser and share user data with competitors.

The trial, presided over by U.S. District Judge Amit Mehta, is anticipated to reach a verdict by August. This case underscores the heightened regulatory scrutiny on Big Tech and its implications for market competition.

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9. Legal and International Developments

Additional news includes the release of Mohsen Madawi, a Columbia University student detained by the Trump administration for his pro-Palestinian demonstrations. Judge Jeffrey Crawford ordered Madawi's release, highlighting concerns over the administration's treatment of legal residents expressing political views.

On the international front, the U.S. and Ukraine are nearing a deal to grant the U.S. access to Ukrainian mineral resources. Central to this agreement is a bi-national investment fund. President Trump has framed the deal as a mechanism for the U.S. to reclaim military aid invested in Ukraine, though the latest drafts show concessions, such as not requiring Kyiv to repay past military aid.

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Conclusion

The episode of WSJ What’s News paints a complex picture of the U.S. economy grappling with trade-induced challenges. From a contracting GDP and cooling inflation to hiring slowdowns and corporate uncertainties, the economic landscape remains fraught with volatility. Meanwhile, tech giants continue to perform well amidst regulatory pressures, and significant legal and international developments add further layers to the unfolding economic narrative.

For a deeper dive into these topics and ongoing updates, listeners are encouraged to stay tuned to WSJ What’s News.

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Notable Quotes:

• Harriet Tory (02:05): “There was a big surge in imports in the first quarter, and that was a drag on growth... underlying demand in the economy.”
• Harriet Tory (03:22): “Inflation was very, very weak in March... tariffs are going to raise the cost of imported goods.”
• Harriet Tory (04:22): “Weakness in hiring is, of course, very bad for the economy...”
• Oyen Adedoyan (05:18): “Employers were actually expected to hire more graduates this year...”
• Chip Cutter (07:08): “They're all fairly worried and uncertain about where the economy goes and what's ahead.”
• Chip Cutter (07:45): “Pulling guidance really frustrates investors...”
• Chip Cutter (08:25): “The only thing we're certain of is we don't know which, if any, of our scenarios will play out.”

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Produced by Anthony Bansi and Pierre Bienname, with supervising producer Michael Cosmides.

Transcript

[Alex Osola]

The spirit of innovation is deeply ingrained in America, and Google is helping Americans innovate in ways both big and small. The Air Force Research Laboratory is partnering with Google Cloud, using AI to accelerate defense research for air, space and cyberspace forces. This is a new era of American innovation. Find out more at G Co AmericanInnovation the US economy shrank in the first quarter as imports surged ahead of tariffs. Plus why a growing number of companies are shelving their financial guidance for the quarter ahead.

[Chip Cutter]

Many executives began this Trump administration feeling really optimistic. And right now the overwhelming mood is that it's just uncertain, it's tough to navigate, and companies don't know where things are headed.

[Alex Osola]

And a federal judge orders the release of a Columbia student detained by the Trump administration. It's Wednesday, April 30th. I'm Alex Osola for the Wall Street Journal. This is the PM edition of what's News, the top headlines and business stories that move the world. The US Economy shrank at the start of this year as the trade turmoil started to hit, prompting businesses to stock up on goods from overseas. The Commerce Department said today that the US Gross domestic product, the value of all goods and services produced across the economy, had its steepest decline since the first quarter of 2022. Stocks fell broadly after the release of the data before major indexes pared declines in the afternoon. In the end, major U.S. indexes ended the day mixed. The Dow was up 0.4%, the S&P 500 rose 0.2%, and the Nasdaq closed down about 0.1%. To tell us more about the GDP and other economic data out today, I'm joined by WSJ economic correspondent Harriet Tory. Harriet, as the Commerce Department said today, the US GDP shrank in the first quarter by 0.3%. What does that tell us about the health of the economy now?

[Harriet Tory]

Well, the data is a little bit old at this point because it looks at the period from January, February, March, and of course, now we're almost in May. And April was a huge month because that was the month that we saw the Liberation Day announcements. Having said that, there was definitely some anxiety about tariffs in the first quarter as well, because tariffs were beginning to be introduced pretty much as soon as the Trump administration took office. How we saw this reflected in GDP was that there was a big surge in imports in the first quarter, and that was a drag on growth. But if you look at the underlying measures of growth in the economy, when you strip out trade and inventories and government spending, which was also down because of the Doge cuts that stayed pretty stable. So consumer spending slowed, but people did continue to spend on services and on various other things. So it wasn't a dramatic weakening in underlying demand in the economy. But the headline number was of course, very impacted by this big increase in imports. At the same time, we are in a dramatically different environment in the second quarter.

[Alex Osola]

Let's talk about inflation. The Commerce Department also said today that the Personal Consumption Expenditures Price Index, the Fed's preferred gauge of inflation, rose by 2.3%. That's still higher than the Fed's 2% target, but it's the coolest reading since last fall. Does it seem likely that inflation will stay this way?

[Harriet Tory]

Inflation was very, very weak in March, which is of course a good thing after so many years of rising prices. And we saw that in the CPI report from the Labor Department as well as this out today from Commerce. But it's unlikely that, given tariffs, that inflation is going to continue to cool as it has in recent months. That's because tariffs raise the cost of imported goods and that will inevitably impact pricing for consumers at some point down the line. So we didn't see any evidence in March of this happening. In fact, spending was pretty strong in March and inflation was very moderate. We saw a big jump in spending on vehicles because people were keen to purchase new cars ahead of potential tariffs on imports.

[Alex Osola]

And finally, let's move on to discuss hiring. The ADP National Employment Report showed that hiring in the US private sector slowed markedly in April. 62,000 jobs were created this month, down from 147,000 in March. Economists had expected hiring to slow less sharply.

[Harriet Tory]

This is data for April, so it comes after the GDP report. But the labor market is definitely being eyed very, very closely because weakness in hiring is, of course, very bad for the economy because when people lose their jobs, they lose their incomes, they stop spending and it ripples throughout the economy. So the ADP report was definitely weaker than expected. But all eyes at this point will be on the jobs report on Friday.

[Alex Osola]

That was WSJ economic correspondent Harriet Tory. Thanks so much, Harriet.

[Harriet Tory]

Thank you.

[Alex Osola]

No one is feeling the impact of a hiring slowdown more than the class of 2025. Companies have retreated from plans to boost college graduate hiring this spring. The federal government is contracting. And consulting firms, a potential first employer for many college grads, are also retrenching. Personal finance reporter Oyen Adedoyan told our your Money Briefing podcast why this job market reality isn't quite what soon to be grads were expecting.

[Oyen Adedoyan]

According to the data it looks like employers were actually expected to hire more graduates this year. There was a 7.3% increase that employers were projecting in the fall. But now employers are saying that they expect to hire the same number of graduates as they did last year. And this is according to a spring survey of more than 200 employers by the national association of Colleges and Employers. We're also seeing a similar trend with the federal government, which is a place that a lot of graduates see as a stable place to start their careers. Hiring freezes brought on by the Trump administration has meant that certain entry level jobs in the federal government are no longer an option.

[Alex Osola]

To hear more from the conversation with Oyin, check out tomorrow's episode of youf Money Briefing. Coming up, some US Companies are yanking their guidance for the next quarter. More on what that means for them and their investors after the break.

[Oyen Adedoyan]

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[Alex Osola]

Automaker Stellantis suspended its full year guidance today, citing U.S. tariffs and the difficulty in predicting their potential impact on market volumes and the competitive landscape. It's the latest of a number of companies to do so, including General Motors, JetBlue, Snap and Volvo. For more, I'm joined by WSJ reporter Chip Cutter. Chip, I just rattled off a few companies that have pulled their guidance. What do they have in common?

[Chip Cutter]

Right now? They're all fairly worried and uncertain about where the economy goes and what's ahead. And I think that's why you see so many CEOs of big companies either pulling their guidance or just saying that they feel really unclear right now. And it's a couple of things. One is the shape shifting nature of the Trump administration's tariff policies. There's also this lingering fear that all of this noise is going to lead consumers to pull back on demand. And so in this sort of environment, a number of executives just say it doesn't make sense for us to give numbers because we just have no idea what scenario is going to play out.

[Alex Osola]

What does the lack of forward guidance mean for these companies and for their investors?

[Chip Cutter]

It's a real sign that we are in a different moment. Pulling guidance really frustrates investors because it can make it harder to evaluate companies. Certainly Wall street wants these numbers to be able to set their own expectations. All of this just shows the degree to which executives are really frustrated right now because they just don't know what's happening next. The last time we saw companies really pull forecasts in a meaningful way was right at the start of the pandemic in 2020, where you just saw hundreds of companies withdraw their gu. And so we're not exactly in that moment just yet. But there is certainly a feeling that it's just gotten harder and harder to.

[Alex Osola]

Predict what's ahead for the companies that are still offering guidance. How are they doing it amid all this uncertainty?

[Chip Cutter]

The example of United Airlines is a really good one where they've offered two different paths where they say, okay, if things go this way, here's our profit expectations, here's our business expectations. If it goes another path, here's what we might expect. So you see this like AB testing a forecast. And Carol Tamey, the CEO of ups, said this week that the only thing we're certain of is we don't know which, if any, of our scenarios will play out. That's a comment that resonates with lots of executives across different industries right now.

[Alex Osola]

That was WSJ reporter Chip Cutter. Thank you, Chip.

[Chip Cutter]

Thanks as always.

[Alex Osola]

Microsoft logged double digit revenue growth in its fiscal third quarter. All three of the company's main business units topped internal projections, led by a 21% revenue increase in its cloud business, overall profit rose to about $26 billion, up from roughly $22 billion a year earlier. And Facebook parent Meta platforms posted revenue growth in the first quarter and indicated growth would remain steady in the current quarter, squashing concerns that President Trump's tariffs would harm its global digital ads business. The social media giant said its sales grew by 16%, to more than $42 billion ahead of analyst expectations. Its net income for the January to March period was $16.6 billion. In other news, Google CEO Sundar Pichai has urged a judge to reject the extraordinary measures proposed by the Justice Department to curtail the company's dominance in online search. The government has proposed to force a sale of Google's Chrome browser and require that Google share user data, like search histories, with rivals. The testimony came during a trial before U.S. district Judge Amit Mehta in Washington, who ruled last year that Google had an illegal monopoly over online search. The judge is now hearing arguments and testimony over what remedy he should impose to restore competition and has said that he plans to rule by August. A federal judge in Vermont has ordered the government to release Columbia University student Mohsen Madawi while his case proceeds, saying the Trump administration was threatening to deport legal residents for stating their political views. Madawi, a green card holder, organized pro Palestinian demonstrations at Colombia. Judge Jeffrey Crawford ordered Madawi's release on the condition he return for all court hearings. And Ukraine and the US Are expected to sign a deal for access to Ukrainian mineral wealth in the next 24 hours. That's according to Kyiv officials. Central to the agreement is an investment fund that both Ukraine and the US Will contribute to and oversee equally. President Trump has portrayed the deal as a way for the US to recoup tens of billions of dollars in military aid to Ukraine. But in what appears to be a major concession to Ukraine, the latest draft doesn't require Kyiv to repay past military aid. The US Will, however, be able to count new military aid as a contribution to the fund. And that's what's news for this Wednesday afternoon. Today's show is produced by Anthony Bansi and Pierre Bienname, with supervising producer Michael Cosmides. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.