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U.S. Economy Contracts 0.3% in Q1 2025 as Tariff Uncertainty Hits Growth

A surge in imports ahead of Trump’s planned tariffs and reduced federal spending drove the first GDP decline since early 2022.

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HOBOKEN, NJ - MAY 15: The sun sets behind an American Flag on May 14, 2020 in Hoboken, New Jersey. (Photo by Gary Hershorn/Getty Images)
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Overview

  • The U.S. economy shrank by 0.3% in the first quarter of 2025, falling short of economists' expectations for modest growth.
  • Businesses rushed to import goods ahead of sweeping tariffs announced by President Trump, driving a 41.3% surge in imports that subtracted over five percentage points from GDP.
  • Government spending reductions further contributed to the contraction, highlighting fiscal policy shifts as a key factor in the downturn.
  • Exports rose by 1.8%, while inflation pressures eased with the personal consumption expenditures price index increasing by just 1.8%, its slowest pace since early 2023.
  • Stock market futures tied to the Dow Jones, S&P 500, and Nasdaq dropped sharply following the release of the GDP report, reflecting investor concerns over recession risks.