GDP shrinks for first time in 3 years as Trump tariffs trigger record trade deficit
Consumer spending slows in the first quarter Story developing. Stay tuned for updates here.
The U.S. economy contracted in the first quarter of 2025 for the first time in three years, reflecting a surge in imports ahead of President Trump's tariffs and a slowdown in consumer spending.
Gross domestic product, the official report card on the economy, shrank at a 0.3% annual rate from January to March, the government said Wednesday. It's the first contraction in GDP since early 2022.
The biggest culprit behind the negative reading was a record surge in imports as U.S. businesses sought to bring in foreign goods before the tariffs took effect. Tariffs typically raise the cost of imports.
A bigger trade deficit subtracts from GDP.
Consumer spending, the main engine of the economy, rose at a decent 1.8% pace, but it slowed considerably from the second half of 2024.
Big picture: GDP is a look at the economy in the rearview mirror, but the road ahead looks very bumpy. The worst trade wars in decades have roiled the U.S. and global economies.
The White House is negotiating new trade deals with scores of countries, but these deals take time to put together.
The longer the trade fights go on and on, analysts warn, the bigger the threat of a recession. Tariffs could also raise inflation and make it harder for the Federal Reserve to cut interest rates to try to help the economy.
Source: Dow Jones Newswires
