Washington, April 30 – The U.S. economy contracted in the first quarter of 2025, dragged down by a sharp rise in imports and a pullback in government spending, as businesses rushed to bring goods into the country ahead of new trade tariffs imposed by President Donald Trump.
Gross domestic product (GDP) fell at a seasonally adjusted annualized rate of 0.3%, the Commerce Department said on Tuesday, marking a stark reversal from the 2.4% growth recorded in the previous quarter.
The downturn was driven largely by a surge in imports of over 40%, as firms scrambled to stockpile foreign goods before tariffs took effect. Because imports are subtracted in the GDP calculation, the spike weighed heavily on overall output, despite underlying strength in consumer and business activity.
“This contraction in GDP is not the start of a recession,” economists at Wells Fargo wrote in a note, cautioning against reading too much into the headline figure. “The U.S. economy is at greater risk of recession today than a month ago, but the fundamentals remain intact.”
Consumer spending, which accounts for roughly two-thirds of U.S. economic activity, rose by 1.8%, albeit at a slower pace than in 2024. Business investment also surprised to the upside, and final sales to private domestic purchasers – a key measure of demand – advanced by a solid 3%, little changed from the prior quarter.
Still, the front-loading of imports and purchases has muddied the economic picture, analysts say. “The figures could be distorted by people pulling forward their purchases in anticipation of tariffs,” said Paul Ashworth, chief North America economist at Capital Economics. “Overall, not as bad as feared.”
The report does not include the effects of Trump’s latest round of tariffs, dubbed “Liberation Day” measures, targeting China and several other countries. Announced in early April, those actions sparked a sharp sell-off in equity and currency markets.
Since returning to the White House in January, Trump has reignited trade tensions, introducing a sweeping set of import duties that he claims will raise revenue and boost domestic manufacturing. Despite watering down some policies under political pressure, the administration’s actions have pushed the effective average tariff rate to its highest level in more than a century, economists say.
Some companies have already begun to pass on costs. Toolmaker Stanley Black & Decker said on Wednesday it would raise prices in response to the new levies. Automakers including Stellantis and Mercedes have withheld financial guidance for the months ahead, citing tariff-related uncertainty.
Trump dismissed concerns over the economic contraction, blaming a “Biden overhang” for recent market turbulence and insisting the downturn had “NOTHING TO DO WITH TARIFFS.”
Democratic Congressman Ritchie Torres of New York criticized the administration’s policies, saying Trump had “finally liberated the American economy – from growth.”
U.S. stock indexes opened lower following the GDP release, paring recent gains after investors had welcomed Trump’s earlier moves to scale back some tariff plans.
