By Lumine
WASHINGTON, D.C. The U.S. economy shrank during the first quarter of 2025, marking a shaky economic start to President Donald Trump’s second term, as trade tensions and policy uncertainty unsettle markets and businesses.
According to new data from the U.S. Commerce Department, Gross Domestic Product (GDP) declined at an annualized rate of 0.3%, a sharp reversal from the 2.4% growth recorded in the final quarter of 2024.
“The drop reflects mounting fears tied to Trump’s aggressive new tariff strategy,” said Max Zahn of ABC News, noting that an import surge and falling federal spending were key drivers of the contraction.
“Liberation Day” Tariffs Cast Economic Shadow
The downturn preceded the rollout of Trump’s signature “Liberation Day” tariffs in early April, which spurred corporate stockpiling in anticipation of rising costs.
Imports surged by over 40%, swelling inventories and creating a mechanical GDP drop, since imports are subtracted from the final economic output.
While some economists had forecast a slowdown, the sharpness of the decline caught many by surprise.
“This doesn’t necessarily signal a recession,” said S&P Global Ratings in a client note. “But the distortion caused by frontloaded imports masks the true state of the economy.”
Federal spending also fell by 5%, compounding the weakness. Analysts warn that such mixed signals may blur the true economic picture, especially as the U.S. adapts to Trump’s revived trade war rhetoric.
A Nation on Edge
Consumer sentiment remains fragile, and financial markets have responded with unease to Trump’s evolving economic agenda. Yet, some economic fundamentals remain surprisingly intact:
• Unemployment remains near historic lows
• Job growth continues, though at a slower pace
• Inflation has eased, retreating from its 2022 peak
Still, the disconnect between surface-level data and deeper trends has economists urging caution.
“We’re in a transition phase,” said Fed Chair Jerome Powell during a speech in Chicago. “The data looks solid on the surface, but deeper indicators are flashing caution.”
Is a Recession Looming?
The U.S. is not yet in a technical recession, defined as two consecutive quarters of GDP decline—but concerns are mounting. The National Bureau of Economic Research (NBER) has not yet made a formal declaration, emphasizing the need to assess a broader range of economic indicators.
Looking AheadWith tariff battles reignited, federal spending trimmed, and consumer confidence rattled, all attention now turns to second-quarter performance. Will the U.S. economy rebound, or are we on the verge of a deeper downturn?
