The US economy shrank in the first quarter of 2025, marking its first contraction since early 2022, as a surge in imports ahead of President Trump’s sweeping new tariffs dragged down output, official figures show.
Gross domestic product (GDP) fell by 0.3% on an annualised basis between January and March, according to the US Bureau of Economic Analysis (BEA), ending a period of strong post-pandemic growth. The figure was worse than the 0.2% drop expected by analysts and a sharp reversal from 2.4% growth in the previous quarter.
The contraction was largely caused by a 41.3% spike in imports, as businesses rushed to stockpile foreign goods before tariffs took full effect. Since imports subtract from GDP, this surge had a negative impact on the growth figures. America’s goods trade deficit also hit a record high in March.
Wall Street reacted sharply to the news, with early losses across major indices. However, markets stabilised by close: the Dow Jones rose 0.4%, the S&P 500 edged up 0.2%, and the Nasdaq recovered from a steep drop to end just 0.1% lower.
Economists believe the downturn may be temporary. Paul Ashworth of Capital Economics noted that the import surge is already reversing, which “should boost second-quarter GDP.” ING’s James Knightley said businesses were “desperately trying to bring in as many goods as possible ahead of tariffs.”
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