U.S. gross domestic product (GDP) shrank during the first quarter of 2025 as a surge of imports ahead of President Trump’s tariffs took a bite out of economic growth calculations.
U.S. GDP fell at an annualized rate of 0.3 percent during the first three months of the year, according to data released Wednesday by the Commerce Department, after an annualized increase of 2.4 percent in the fourth quarter of 2024.
Economists had expected U.S. GDP to fall amid a steep increase in orders of foreign products, which could be far more expensive once Trump’s full slate of tariffs take effect.
“The drop seems to be wholly due to tariff-related distortions,” economists at Pantheon Macroeconomics wrote in a Tuesday preview of the report.
“GDP likely would have risen in the absence of the dramatic shift in policy. Underlying momentum in growth was undoubtedly waning before the tariff shock, though, and in its aftermath we now expect activity to stagnate this year.”
The first-quarter import surge took roughly 5 percentage points off of the GDP growth rate, according to the Commerce Department, washing out nearly 4 percentage points from domestic investment and roughly 1 percentage point from consumer spending.
Real final sales to private domestic purchasers — a way of measuring the output of the economy without the hit of imports — rose 3 percent on the quarter, in line with the final months of the Biden administration.
While that level would suggest a sturdy domestic economy, some experts fear the early burst of spending could give way as Trump’s tariffs fully take effect in the second quarter.
“The contraction was largely a function of economic activity being pulled forward as importers, businesses and consumers rushed to get ahead of the tariff implementation,” wrote Gregory Daco, chief economist at EY.
“This artificial front-loading of demand sets the stage for a sharper demand cliff in Q2—a far more troubling phase of the ongoing economic slowdown.”
Americans are already forced to pay import taxes of up to 145 percent on Chinese goods, a level that has brought much of U.S-China trade to a standstill. West Coast ports, which handle most shipments to and from China, have seen a sharp drop in activity as companies delay or attempt to reroute goods.
Trump’s tariffs on imported aluminum and steel have also taken effect, and the president’s 25 percent taxes on foreign autos and auto parts are on track to take effect Friday.
The stock market, which had stabilized in recent weeks after a tariff-induced meltdown, fell on the GDP slump, prompting a frustrated Truth Social post from Trump.
“This is Biden’s Stock Market, not Trump’s. I didn’t take over until January 20th. Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers. Our Country will boom, but we have to get rid of the Biden ‘Overhang,’” Trump said on Truth Social.
The president added, “This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers, but when the boom begins, it will be like no other. BE PATIENT!!!’”
Updated at 11:10 a.m. EST
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