The US economy unexpectedly contracted in the first quarter of 2025, sparking recession fears and rattling markets, as President Donald Trump’s aggressive trade policies and political blame game stoked investor uncertainty.
A defensive Trump quickly blamed former President Joe Biden while insisting the economic “boom” he promised will still materialize—eventually.
GDP shrinks as businesses rush to beat Trump tariffs
Gross domestic product (GDP) fell at a 0.3% annualized rate between January and March, according to Commerce Department data released Wednesday.
It marks the first quarter of negative growth since Q1 2022 and a sharp reversal from the 2.4% expansion recorded in Q4 2024.
Economists polled by Dow Jones had expected 0.4% growth.
US GDP shrunk at an annualized rate of 0.3% in the first quarter of 2025.
1.3K
Reply
Copy link
The main culprit: a 41% surge in imports as companies scrambled to stockpile goods before Trump’s “reciprocal trade” tariffs took effect in early April.
Goods imports alone jumped 50.9%, subtracting over five percentage points from GDP.
Meanwhile, exports rose just 1.8%, worsening the trade deficit.
Consumer spending slows; government cuts weigh on growth
Personal consumption expenditures—an essential component of the US economy—rose only 1.8%, down sharply from 4% in the previous quarter.
Government spending also contracted, with much of the decline attributed to mass cancellations of federal contracts by Elon Musk’s Department of Government Efficiency, a newly created office under Trump.
Private domestic investment was a bright spot, surging 21.9%—a sign that some firms are front-loading capital expenditures to navigate policy changes or take advantage of tax incentives.
Markets sink, jobs report disappoints
The weak data sent financial markets sharply lower. Dow Jones Industrial Average futures fell 315 points, or 0.7%, while the S&P 500 dropped 1.2% and Nasdaq 100 slid 1.7%.
Stocks had already been on edge following Trump’s April 2 tariff announcement, which triggered an initial 11% drop in the S&P 500 before a modest recovery. The index is still down 1% for April.
A separate report from ADP added to the gloom, showing private payrolls rose by just 62,000 in April—well below the 120,000 expected and marking the weakest job growth since July 2024.
Trump lashes out on Truth Social, blames Biden
In a series of posts on Truth Social, Trump sought to deflect blame.
“This is Biden’s Stock Market, not Trump’s,” he wrote. “Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers. Our Country will boom, but we have to get rid of the Biden ‘Overhang.’”
This is Biden’s Stock Market, not Trump’s. 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. Our Country will boom, but we have to get rid of the Biden “Overhang.” This will take a while,
25
Reply
Copy link
He insisted that the downturn “has NOTHING TO DO WITH TARIFFS,” despite Commerce Department data indicating the opposite—that businesses accelerated imports to avoid his tariffs.
Inflation heats up as uncertainty clouds outlook
While Trump touted falling prices during a recent speech celebrating his 100th day in office, the GDP report told a different story. The personal consumption expenditures (PCE) price index—the Federal Reserve’s preferred inflation gauge—rose 3.6% in Q1, up from 2.4% the previous quarter.
With economic growth faltering, inflation rising, and investor confidence shaken, all eyes are now on how the Trump administration handles trade and fiscal policy in the coming months
The post US GDP contracts 0.3% in Q1 2025 as Trump blames Biden and defends tariffs appeared first on Invezz
