The US economy unexpectedly contracted in the first three months of 2025 as President Trump’s tariffs sent companies rushing to expedite imports, according to data released on Wednesday.
Gross domestic product, a measure of all goods and services produced in the US, from January through March plunged 0.3%, according to the Department of Commerce.
That’s a dip into negative territory versus the 0.4% increase that economists surveyed by Dow Jones had expected.
But in the days before the report’s release, some economists tweaked their projections to negative growth as they took into account a massive rise in imports.
“Wednesday’s GDP print showed the economy contracted during the first quarter as a perfect storm of factors took shape, including tariff uncertainty and DOGE spending cuts,” Paul Stanley, chief investment officer at Granite Bay Wealth Management, said in a note.
“While it’s unsettling to see a negative GDP print, the jury is still out on if the economy will enter a recession,” Stanley continued, adding that speedy tariff negotiations could help avoid a broader economic downturn – albeit narrowly.
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.
These imports subtract from the GDP, and took more than 5 percentage points off the total reading. Exports, meanwhile, jumped just 1.8% in the same three months.
President Trump took to Truth Social to blame predecessor 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!!!”
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.
Futures tied to the Dow Jones, S&P 500 and Nasdaq plummeted Wednesday morning after the GDP report’s release.
