This week, much of the mainstream media ran with the headline that the economy contracted in the first quarter of this year. Predictably, they promptly blamed President Donald Trump.
But a quick glance under the hood shows the data points to a much stronger economy than the headlines suggest.
On Wednesday, the Bureau of Economic Analysis released its estimate of economic growth measured by gross domestic product (GDP) for January through March. The topline figure pointed to a contraction of 0.3 percent—a number that certainly doesn’t seem positive.
If we learned anything from economic data under former President Joe Biden, though, it’s that headlines are often deceptive. For example, Biden’s blowout government spending increased GDP figures but added nothing to the productive private sector. In other words, the numbers looked good, but Americans were growing poorer.
Fast forward to Trump’s first quarter back in office. With the help of Elon Musk and the DOGE crew, he’s managed not only to slow government purchases but to decrease them for the first time in three years. That accomplishment showed up as a 0.25 percentage point subtraction from GDP—essentially accounting for the entire quarterly decline.
Reducing government is a great sign that Trump is “reprivatizing the economy” (as Treasury Secretary Scott Bessent has put it), but this positive move shows up statistically as a decrease in GDP.
The even larger subtraction to GDP came from imports, which exploded 41.3 percent as folks raced to bring products into the country before import taxes could take effect. That pushed GDP down by 5.04 percentage points.
Thus, the decline in government spending and the one-off spike in imports account for the entire quarterly decline in GDP, and then some. In other words, the terrible news really isn’t all that terrible. In the case of lower government spending, it’s actually great news!
Another positive development—which the talking heads somehow managed to miss, was that interest on the federal debt declined for Q1 2025.
When Trump left office, interest on the debt cost about $600 billion a year. Biden managed to nearly double that, with interest payments exceeding an annualized $1.1 trillion by the end of his term—exceeding all defense spending combined.
Both Trump and Secretary Bessent deserve tremendous credit for arresting the exploding cost of servicing the nation’s debt. But the best part of the GDP report was this showstopper: investment (the impetus of long-run real economic growth) is skyrocketing, up 21.9 percent at a seasonally adjusted annualized rate.
Under Biden, investment lagged badly below its pre-pandemic trend, even turning negative by the end of his term.
Trump has managed to reverse that in short order, partly by promising the world that he will transform America into the most business-friendly country on the planet via tax and regulatory cuts and boosts in energy production. Those promises incentivize the reshoring of manufacturing and the industrial base.
This makes it imperative that Congress get its act together and get a tax cut across the finish line for American people and businesses, both of whom desperately need relief from the Biden era of big government.
If Congress and the president can both reduce marginal tax rates and peel back burdensome overregulation, the economy will be off to the races. Permitting reform and an energy boom would be the icing on the cake, providing the winning formula to get growth up and inflation down.
Reducing government spending has already noticeably impacted inflation. These latest data show that while inflation had been reaccelerating, spiking in January (just as Trump took office), price increases ground to a halt by March.
The plan to shrink government and grow the private sector is already working well. Now, it’s time to capitalize on that momentum and start bringing prices down by implementing more of Trump’s pro-growth agenda.
As bilateral trade agreements bring resolution to the tariff war, we should expect the import surge to evaporate and exports to climb. That in turn will show up as a surge in GDP (just as the rise in imports dragged down GDP).
Indeed, the Federal Reserve Banks of both Atlanta and New York are now forecasting that economic growth in the second quarter will exceed an annualized 2.0 percent.
When it came to economic data under Biden, the devil was always in the details. But, under Trump, the angels are in the details, with this GDP report’s relatively strong internals giving cause for celebration. Now, it’s time for Congress and Trump to build on their momentum and deliver a win for the American people.
EJ Antoni is a Research Fellow and the Richard Aster Fellow in The Heritage Foundation’s Grover M. Hermann Center for the Federal Budget.
Reprinted with Permission from Heritage.org – By EJ Antoni
The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.
It’s hidden because it take time for it takes time seep through! It doesn’t help when the media hide the improvement of economy!
Government spending should detract from GDP. It’s money taken out of the economy and usually wasted. Government produces nothing. Check any socialist country to see just how well government produces anything. If poverty is the goal, then government is the answer.
Someone needs to re-visit this “China-Fentanyl” narrative. China doesn’t ship Fentanyl to Mexico or the United States or Canada or anywhere else. What some Chinese companies do ship are chemicals which CAN be used in illegally manufacturing Fentanyl. These chemicals can be as innocent and certainly multi purpose as simple ether. There are chemical supply houses right here in America that one can purchase ether from.
If we have to gin up the bleating sheep of our population to get them to accept a war against China we WILL lose, then at least use a reasonable BS argument.
Thanks for a positive outlook on the economy. Not all this is noticeable from a consumer point of view.
When AI delivers the same services at drastically lower costs, economic growth will decrease but with dramatic productivity improvement and avoidance of costs.
The Federal Reserve is the key to controlling inflation. If the interest rate is foo low, and requires printing of more dollars then history shows that is not good. The US dollar is still the favored currency in the world & we need to keep it that way . And, how will cryptocurrency be good for USA economic health and our dollar?
The impact of the tariff war & impact of the large number of federal employees laid off has not shown up in economy yet. Some of Fed employees signed agreement to not come to work if paid wages thru September & I would assume they are not shown as unemployed.
We can’t economically grow one single bit until we get a handle on our massive debt. Imagine having to lay out well over a trillion a year just on the interest alone……and we have GREAT difficulty doing even that.
The eastern world is passing us by because our nation is essentially like an incompetent teenager on a shopping spree with daddys credit card. The teenager is our government and the daddy are us taxpayers.
TDS is epidemic in the MSM and Democrat party….
When someone can explain to me how my nations economy is doing so well when it is drowning in debt it can never repay and is resorting to coercive blackmail against its supposed allies to force them to buy our debt instruments laughably called “treasuries”, then I too will join the flock of sheep and give bleating voice to how “beautiful” our economy is.
Also, am I the only person that sees our starting the conflict in Ukraine in a failed attempt at gaining regime change in Russia which would have allowed us to spread across the remnants of Russia pillaging the wealth that nation established for itself? Our great nation has stooped to attempted theft rather than daring to actually compete in the global market.
That sure seems disgusting. A nation built on the standards of pirates. The Founding Fathers would weep.