U.S. economy contracts in Q1 amid impact from tariff-fueled imports

U.S. economy contracts in Q1 amid impact from tariff-fueled imports

The U.S. economy contracted in the first quarter, weighed down by a deluge of goods imported by businesses eager to avoid higher costs, underscoring the disruptive nature of President Donald Trump’s often chaotic tariff policy.

Gross domestic product decreased at a 0.3 per cent annualized rate last quarter, the Commerce Department’s Bureau of Economic Analysis said in its advance estimate of first-quarter GDP on Wednesday.

U.S. gross domestic product (GDP)

Economists polled by Reuters had forecast that GDP increased at a 0.3 per cent pace in the January-March period. The survey was, however, concluded before data on Tuesday showed the goods trade deficit surged to an all-time high in March amid record imports, which prompted most economists to sharply downgrade their GDP estimates.

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The economy grew at a 2.4 per cent pace in the fourth quarter.

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But the report likely grossly exaggerated the economy’s dimming prospects as consumer spending continued to grow, though at a moderate pace.

Coinciding with Trump’s first 100 days in office, it nonetheless reinforced Americans’ growing disapproval of his handling of the economy so far. Trump swept to victory last November on voter angst over the economy, especially inflation.


Click to play video: 'Bank of Canada keeps interest rate steady at 2.75% amid Trump tariff turmoil'


Bank of Canada keeps interest rate steady at 2.75% amid Trump tariff turmoil


Consumer confidence is near five-year lows and business sentiment has tanked. Airlines have pulled their 2025 financial forecasts, citing uncertainty over spending on non-essential travel because of tariffs, which economists have warned will raise costs for companies and households.

Given that an unusually large amount of non-monetary gold had accounted for some of the jump in imports, some economists warned against placing too much weight on the GDP number. Others argued that the data did not change the narrative of an economy struggling because of uncertainty due to tariffs.

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Inflation picked up last quarter and is expected to rise further through the year. Economists expect the Federal Reserve to resume cutting interest rates at some point this year.

Trump on Tuesday softened the blow of his auto tariffs through an executive order mixing credits with relief from other levies on parts and materials.

A 145 per cent tariff on Chinese goods, which unleashed a trade war between Washington and Beijing, remains in place, as does an array of other import duties. Trump sees tariffs as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining U.S. industrial base.


DJ Kamal Mustafa

DJ Kamal Mustafa

I’m DJ Kamal Mustafa, the founder and Editor-in-Chief of EMEA Tribune, a digital news platform that focuses on critical stories from Europe, the Middle East, Africa, and Pakistan. With a deep passion for investigative journalism, I’ve built a reputation for delivering exclusive, thought-provoking reports that highlight the region’s most pressing issues.

I’ve been a journalist for over 10 years, and I’m currently associated with EMEA Tribune, ARY News, Daily Times, Samaa TV, Minute Mirror, and many other media outlets. Throughout my career, I’ve remained committed to uncovering the truth and providing valuable insights that inform and engage the public.