Home Business U.S. Economy Contracts at 0.3% Rate in First Quarter

U.S. Economy Contracts at 0.3% Rate in First Quarter

Apr 30, 2025

Key Points

* U.S. GDP fell 0.3% in Q1 2025, the largest drop since Q1 2022, Commerce Department data showed. * Imports surged 41.3% as firms front-loaded purchases to avoid tariffs, subtracting 4.83% from GDP. * Economists, the Fed, and company CEOs worry tariffs will cause inflation, unemployment, and planning uncertainty.

The U.S. economy contracted in the first three months of 2025, as businesses rushed to stock up on imports ahead of tariffs.

The Commerce Department said U.S. gross domestic product—the value of all goods and services produced across the economy—fell at a seasonally and inflation adjusted 0.3% annual rate in the first quarter. That was the steepest decline since the first quarter of 2022.

Net exports, the difference between imports and exports, were a large drag on growth in the first quarter, stripping 4.83 percentage points from headline GDP. Imports increased at a 41.3% pace in the first quarter as businesses tried to get ahead of tariffs that began to come into effect during the first three months of the year and were dramatically increased in the current, second quarter.

“The headline decline overstates weakness because a lot of that was tariff-induced pull-forward,” said Shannon Grein, an economist at Wells Fargo. “Overall, I think that it was a relatively solid underlying report when it comes to demand.”

The reading fell short of the 0.4% growth that economists surveyed by The Wall Street Journal expected.

Stock futures, which were negative before the report, fell further after the GDP release.

The GDP report is the first major economic scorecard for the January-to-March quarter, a period in which the White House changed hands from President Joe Biden to President Trump. January—most of which was before Trump took office—was hit by wildfires in Los Angeles and disruptive winter storms in many parts of the country.

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