U.S. Economy Shrinks 0.3% in Q1 as Trump Tariffs Spark Import Surge

By Favoredjane

The U.S. economy unexpectedly contracted by 0.3% in the first quarter of 2025, marking the first downturn since early 2022. The contraction came as businesses and consumers rushed to import goods ahead of new tariffs imposed by President Donald Trump, signaling the growing impact of his trade war.

Imports surged 41.3%, with a staggering 50.9% increase in goods — the largest spike since 1974, outside of the COVID-19 pandemic. This massive import influx took more than five percentage points off GDP growth, while exports rose only 1.8%, offering little relief.

“The trade war’s impact is undeniable,” said Chris Rupkey, chief economist at Fwd Bonds. “There’s no sugar-coating it. Growth has simply vanished.”

Adding to the economic strain, consumer spending slowed, and federal government spending dropped sharply due to ongoing cost-cutting measures under Elon Musk’s Department of Government Efficiency. While some economists expect the surge in imports to reverse in the coming months, the contraction has raised alarms about the potential long-term effects of the tariff policies.

With the second quarter now underway, all eyes are on how the economy will respond in the face of ongoing trade tensions and shifting fiscal policies.