Trade Wars Trigger Economic Contraction in First Quarter
The US economy contracted by 0.5% in early 2025 as trade wars affected business operations. Imports surged by 37.9%, pulling GDP down by nearly 4.7 percentage points. Consumer spending and government expenditure also fell. Despite this, second-quarter growth is expected to rebound to 3%.
- Country:
- United States
The U.S. economy experienced a contraction in the first quarter of 2025, shrinking at a 0.5% annual rate due to trade disruptions initiated by President Donald Trump. The Commerce Department's report marks an unexpected decline from previous GDP estimates.
The downturn was primarily driven by a massive surge in imports, as U.S. firms and consumers raced to purchase foreign goods prior to the imposition of tariffs, which nearly deducted 4.7 percentage points from GDP. Additionally, consumer spending and federal government expenses both recorded significant drops.
Despite these setbacks, projections suggest a recovery in economic growth for the second quarter, with forecasts predicting a rebound to 3%. The upcoming initial GDP analysis for April-June is anticipated to shed further light on the economic trajectory.
(With inputs from agencies.)
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