The US economy shrinks in the early months of the second term of office of President Donald Trump as a busy proposal of tariffs trigger uncertainty between business and consumers.
US Gross Domestic Product, or GDP, decreased at an annual level of 0.3% for three months ended in March. This figure marks a sharp decline from the annual growth of 2.4% over the past three months of 2024.
The size of the GDP mostly fell because of the surge in imports because the company hoard an inventory to avoid broad tariffs. Before the data release, analyst warned that the decline in GDP because this trend would not reflect economic weaknesses.
Readings come lower than most economists estimated.
The GDP formula government reduces imports in an effort to exclude foreign production from the calculation of total goods and services.
Imports jumped more than 40% earlier this year because the company rushed to the US inventory in front of potential tariffs, data showed. Conversely, federal expenditure fell by about 5% during the first three months of 2025.
The decline in GDP “mainly reflects the increase in imports,” as well as a decrease in government spending, the US Department of Trade said.
Data includes the period before what is called the liberation day rates come into force in early April.
Analysts broadly expect a sharp decline in economic performance earlier this year, although they do not agree with the severity of the slowdown.
“We anticipate a real slowdown in the US economy during the first quarter, driven by increased uncertainty of policies around trade, tariffs, and immigration,” S& P Global rating said in the notes to the client.
Data is likely to be slanted by import floods because the company tries to avoid tariffs, s& P Global ranking says. GDP measurement reduces imports to exclude foreign -made goods and services, so that the surge of imports once can obscure the findings.
“The first quarter GDP reading may not provide an accurate reflection of the underlying economic conditions because it is significantly influenced by imported frontloading,” S& P Global ranking says.
President Donald Trump saw, on the day he welcomed the winner of Super Bowl Lix, NFL champion Philadelphia Eagles in the southern courtyard of the White House in Washington, DC, April 28, 2025.
Leah Millis/Reuters
Many observers define a recession through the steno metric from two quarters of successive decline in GDP which is adjusted to state inflation. The National Economic Research Bureau, a research organization assigned to identify recession formally, uses a more complicated definition that refers to various indicators.
Although lethargic consumer sentiment and sustainable market chaos, some of the main size of the economy remain quite strong.
The unemployment rate is at a low historical level and work growth remains strong, although it has slowed from the previous highest. Meanwhile, inflation was cooled in March, placing price increases far below the peak achieved in 2022, data shows.
Sturdy data offers the best partial certainty, some previous economists told ABC News.
Economic steps such as inflation and recruitment are released one month after the data is collected, and they often reflect changes that move slowly in business or consumer behavior, economists said. As a result, these steps can be proven outdated, especially when the economy is in flux.
Speaking at the Chicago economy club earlier this month, Fed Chair Jerome Powell acknowledged the “strong condition” of the US economy, but he warned about potential slowdown signals.
“Life moves quite quickly,” said Powell.