Xinhua News Agency, Beijing, May 1st - The latest data released by the U.S. Department of Commerce on April 30th showed that the U.S. GDP contracted by 0.3% on an annualized quarterly basis in the first quarter of 2025. This figure was worse than market expectations, highlighting the rising uncertainty caused by the U.S. government's tariff policies and the subsequent decline in business and consumer confidence. British media reported that the Bank of England is assessing the potential impact of the recent weakening of the dollar, implying that the dollar has lost its status as a safe-haven currency.

The U.S. economy contracted by 0.3% in the first quarter.

The latest data released by the U.S. Department of Commerce on April 30th showed that the U.S. GDP contracted by 0.3% on an annualized quarterly basis in the first quarter of 2025. In the fourth quarter of 2024, the U.S. GDP grew by 2.4% on an annualized quarterly basis.

This photo was taken on April 25, 2024, at the Department of Commerce building in Washington D.C. Photo by AP reporter Liu Jie.

This data was worse than expected, highlighting the rising uncertainty caused by the U.S. government's tariff policies and the subsequent decline in business and consumer confidence.

The Department of Commerce stated on the same day that the contraction in the first-quarter GDP was mainly due to a significant increase in imports and reduced government spending.

In detail, the net exports dragged down the GDP by 4.83 percentage points. This indicates that companies are concerned about the possibility of rising tariffs in the future, leading to massive inventory accumulation. Personal consumption expenditure, which accounts for about 70% of the U.S. economy, increased by 1.8%, significantly lower than the 4.0% growth rate in the previous quarter, contributing 1.21 percentage points to the growth of the current quarter. In the same quarter, federal government spending decreased by 5.1%, dragging down economic growth by 0.33 percentage points. Non-residential fixed asset investment, reflecting corporate investment conditions, increased by 9.8%, contributing 1.29 percentage points to the growth of the current quarter.

Economists and businesspeople are generally concerned about the economic outlook due to the widespread imposition of tariffs by the U.S. government on trading partners. Gary Hufbauer, a senior researcher at the Peterson Institute for International Economics and a former Treasury official, told Xinhua reporters recently that the tariff policy is bringing great uncertainty to corporate decision-makers. They are not only worried about their own supply chains and customers but also other areas of impact. This has led to postponed investment decisions and a sharp decline in consumer confidence. He believes that the U.S. economy may fall into recession in the second half of this year.

British Media: The Dollar Has Lost Its Status as a Safe-Haven Currency

According to a report by the British "City Morning Post," Deputy Governor of the Bank of England and Director of the Prudential Regulation Authority, Sam Woods, hinted that the U.S. government eliminated the dollar's status as a safe-haven currency in the first month after initiating a global trade war. After the U.S. government announced the imposition of "reciprocal tariffs" on trading partners on April 2nd, there was a "three-pronged collapse" in the U.S. financial markets, including stocks, foreign exchange, and bonds.

Woods said that the Bank of England is considering how the British financial system will respond to the depreciation of the dollar and the holdings of important dollar assets. According to the "City Morning Post," the Bank of England itself holds a large amount of dollar reserves.

On the 29th, Woods told the House of Commons Treasury Committee that the credibility of the dollar has been damaged, and they are asking themselves, "What will happen if there is a more fundamental decline in demand for assets denominated in dollars."

"This question is difficult to answer, but it is precisely what we are working on now." He said that the UK will continue to "cooperate" with the US in the foreseeable future, but the recent tension caused by US tariff policies has made European allies more united.

Woods said that the Bank of England has not yet requested British commercial banks to report liquidity levels daily. This measure is usually implemented when market volatility is extremely severe.

(Reporters: Xiong Maoling, Bu Xiaoming)

Source: Xinhua News Agency

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