The US economy unexpectedly shrank by 0.3 per cent in the first three months of 2025 — the country’s first contraction in three years.
The fall in growth, measured from January to March, comes as businesses rushed to import goods before new tariffs from President Donald Trump come into force.
The sudden spike in imports cut five percentage points from GDP for the quarter, dragging overall growth into negative territory. In comparison, the economy grew by 2.4 per cent in the final quarter of 2024.
Consumer spending — which is normally a strong driver of US economic growth — also slowed sharply. It rose by just 1.8 per cent in the first quarter, down from four per cent at the end of last year.
At the same time, federal Government spending dropped by 5.1 per cent, putting more pressure on the economy.
Trump has shared his thoughts on the economy after GDP figures were announced on Truth Social, saying: "this is Biden’s Stock Market, not Trump’s.
Economy in crisis as US GDP shrinks 0.3%
GETTY
"I didn’t take over until January 20th. Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers," he says in a post on his Truth Social account.
"Our Country will boom, but we have to get rid of the Biden “Overhang.” 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!!!"
US Treasury Secretary Scott Bessent urged the public to stay focused on the facts.
Bessent said: "People should focus on the actual data rather than general sentiment when assessing the economy’s health."
US GDP shrinks 0.3% in first quarter as companies race to get ahead of Trump tariffs
GETTYHowever, the report only covers the period before President Trump announced the most wide-reaching tariffs yet. That means the figures are unlikely to settle the ongoing debate about the strength of the US economy.
Paul Ashworth, chief North America economist at Capital Economics, believes the downturn could be short-lived. Ashworth said: "The surge now appears to be going into reverse."
He explained that many businesses brought in goods early to beat the tariffs and may now be switching to US-based or alternative suppliers — a move that fits with Trump’s aim to boost American manufacturing.
Ashworth added that if imports begin to fall again, the economy could bounce back over the next few months.
Economists say that although the headline number looks worrying, the broader economy may still have momentum.
PexelsEconomists say that although the headline number looks worrying, the broader economy may still have momentum.
The key question now is whether this drop in GDP is a temporary blip or the beginning of a deeper slowdown caused by rising tariffs, high costs and cautious consumers.
All eyes are now on the months ahead, as fears of a global recession grow.
The market reaction has been swift. Trading on Wall Street opened sharply lower, with all three major indexes in the red.
The S&P 500 fell by 1.55 per cent, the Dow Jones dropped 1.17 per cent, and the Nasdaq tumbled 2.15 per cent — reflecting investor fears over the economic slowdown and the potential impact of Trump's tariffs on business confidence.
