Catenaa, Thursday, June 26, 2025- US economy shrank by 0.5% in the first quarter of 2025, as President Trump’s trade policies disrupted business, official data showed on Thursday.
First-quarter growth sank under a surge of imports as companies in the US rushed to bring in foreign goods before Trump could impose tariffs on them.
The Commerce Department previously estimated that the economy fell 0.2% in the first quarter.
The January-March drop in GDP reversed a 2.4% increase in the last three months of 2024 and marked the first time in three years that the economy contracted. Imports expanded 37.9%, the fastest since 2020, and pushed GDP down by nearly 4.7 percentage points.
Consumer spending also slowed sharply, expanding just.0.5%, down from a robust 4% in fourth-quarter 2024 and a sharp downgrade from the Commerce Department’s previous estimate.
A category within the GDP data that measures the economy’s underlying strength rose at a 1.9% annual rate from January through March, down from 2.9% in the fourth quarter of 2024.
This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.
And federal government spending fell at a 4.6% annual pace, the biggest drop since 2022.
The first-quarter import influx likely won’t be repeated in the April-June quarter and therefore shouldn’t weigh on GDP.
Economists expect second-quarter growth to bounce back to 3% in the second quarter, according to a survey of forecasters by the data firm FactSet.
