US economy unexpectedly shrank in first three months of 2025 on import rush ahead of Trump tariffs
The US economy unexpectedly shrank in the first three months of 2025 as President Trump’s tariffs sent companies rushing to import goods from overseas, according to data released on Wednesday.
Gross domestic product, a measure of all goods and services produced in the US,, according to the Commerce Department.
That dip into negative territory — GDP’s steepest since the first quarter of 2022 — came versus the 0.4% increase that economists surveyed by Dow Jones had expected.
Wednesday’s GDP report “probably overstates the economy’s weakness, but the economy’s weak,” said Mark Zandi, chief economist at Moody’s, pointing to a consumer spending slowdown and decline in federal spending during the first quarter.
“If the administration can’t find an off-ramp on the tariffs soon…then I think we’re going to see a lot more negative GDP numbers dead ahead, and ultimately job losses,” Zandi said.
Imports to the US soared a whopping 41.3% in the same period as businesses rushed to stockpile inventory ahead of Trump’s sweeping tariffs, which threaten to multiply supply chain costs across several industries.
That 41% rate was the highest jump since 2020 – and, not counting the pandemic-driven supply chain crisis, the largest advance since 1972.
These imports subtract from the GDP, and took more than 5 percentage points off the total reading, the biggest quarterly drag since 1947. Exports, meanwhile, rose just 1.8% in the same three months.
President Trump took to Truth Social to blame predecessor President Joe Biden for the lagging economy.
“Our Country will boom, but we have to get rid of the Biden ‘Overhang,'” Trump wrote. “This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers, but when the boom begins, it will be like no other. BE PATIENT!!!”
He later suggested he’ll blame Biden again for the second-quarter GDP results.
“You could even say the next quarter is sort of Biden because it doesn’t just happen on a daily or an hourly basis,” he said during a Cabinet meeting at the White House.
Economists cautioned that the data is largely backward-looking, and largely impacted by the tariffs, which are in flux as the White House doubles down on claims that negotiations are underway.
“While it’s unsettling to see a negative GDP print, the jury is still out on if the economy will enter a recession,” said Paul Stanley, chief investment officer at Granite Bay Wealth Management.
He noted that speedy trade talks could help avoid a broader economic downturn — albeit narrowly.
The increase mostly reflected a jump in imports of consumer goods, except food and automotive — mainly medicinal, dental and pharmaceutical goods, as well as computers and hardware devices, according to the Commerce Department.
A decrease in government spending also sent the GDP sliding, according to the Commerce Department.
The personal consumption expenditures price index — the Fed’s preferred inflation gauge — rose 1.8% for the period, its slowest quarterly gain since early 2023.
The disappointing GDP report sent the Dow Jones, S&P 500 and Nasdaq plummeting Wednesday morning, but they later regained losses, rising 0.4%, 0.2% and declining less than 0.1%, respectively.
