US economy falls 0.2% in the first quarter, hit by Trump's trade war

By AP

Published on 29/05/2025 - 16:48 GMT+2

The US system shrank astatine a 0.2% yearly gait from January done March, nan first driblet successful 3 years, arsenic President Donald Trump’s waste and acquisition wars disrupted business, nan authorities said connected Thursday successful a flimsy upgrade of its first estimate.

First-quarter maturation was brought down by a surge successful imports arsenic companies successful nan United States hurried to bring successful overseas equipment earlier nan president imposed monolithic import taxes.

The January-March driblet successful gross home merchandise — nan nation’s output of equipment and services — reversed a 2.4% summation successful nan 4th fourth of 2024.

Imports grew astatine a 42.6% pace, nan fastest since nan third-quarter of 2020, and shaved much than 5 percent points disconnected GDP growth. Consumer spending besides slowed sharply.

Federal authorities spending, meanwhile, fell astatine a 4.6% yearly pace, nan biggest driblet successful 3 years.

Trade deficits trim GDP. But that’s chiefly a matter of mathematics. GDP is expected to count only what’s produced domestically. So imports — which nan authorities counts arsenic user spending successful nan GDP study erstwhile you buy, say, Costa Rican java — person to beryllium subtracted retired to support them from artificially inflating home production.

The first-quarter import surge apt won’t beryllium repeated successful nan April-June 4th and truthful shouldn’t measurement connected GDP.

From January done March, business finance surged 24.4%. An summation successful inventories — arsenic businesses stocked up ahead of nan tariffs — added much than 2.6 percent points to first-quarter GDP growth.

A class wrong nan GDP information that measures nan economy’s underlying spot roseate astatine a 2.5% yearly complaint from January done March, down from 2.9% successful nan 4th fourth of 2024 but still solid. This class includes user spending and backstage finance but excludes volatile items for illustration exports, inventories and authorities spending.

Trump's tariffs person added sizeable uncertainty to nan economical outlook. He has imposed 10% tariffs connected almost each state successful summation to levies connected steel, aluminium and automobiles.

A national tribunal connected Wednesday blocked nan 10% tariffs arsenic good arsenic circumstantial taxes connected Canadian, Mexican and Chinese imports, saying nan president had overstepped his authority.

Thursday’s study was nan 2nd of 3 Commerce Department estimates of first-quarter GDP. The last type arrives connected 26 June.