The US economy shrank by 0.3% in the first quarter of 2025, marking its first contraction in over two years, as businesses rushed to import goods ahead of President Trump’s sweeping tariff plans, triggering record trade imbalances and unsettling financial markets.
The latest data from the US Bureau of Economic Analysis (BEA) shows the economy sliding into negative territory after 2.4% growth in the final quarter of 2024, and performing worse than the 0.2% decline expected by analysts. It follows a frenzied build-up of imports, which surged 41.3% on an annualised basis as companies moved to stockpile goods ahead of new tariffs.
Because imports are subtracted from GDP in national accounting, the record goods trade deficit in March weighed heavily on growth, even as underlying domestic demand remained relatively stable.
“Importers desperately tried to bring in as many goods as possible ahead of tariffs,” said James Knightley, chief international economist at ING.
“This surge now appears to be reversing, which could give a boost to second-quarter GDP,” added Paul Ashworth of Capital Economics.
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