The US economy shrank more than expected in the first quarter of 2025, with gross domestic product contracting by 0.3%.
Data from the US Bureau of Economic Analysis showed the first year-on-year shrinkage in GDP since 2022, which was worse than the average 0.2% decline predicted by economists.
The biggest drag on growth was trade and lower government spending, the BEA said, as the Trump administration slashed budgets and jobs at various departments.
A surge in imports also weighed on growth to the tune of 4.8% – the most on record.
"The outright fall in headline GDP was mostly due to an unprecedented pre-tariff surge in imports, which probably is being imperfectly measured," said economist Oliver Allen at Pantheon Macroeconmics.
"But we nonetheless see clear signs that the economy already was fundamentally slowing in Q1."
With core PCE inflation at 3.5%, he said a "period of stagnation now likely lies ahead if the current set of tariffs is maintained, with recession the most likely outcome if the additional reciprocal tariffs are imposed in full in July".
While the US economy's sharp slowdown was largely as expected, this does not necessarily send a warning sign that a recession is imminent, says Kathleen Brooks, research director at XTB.
As the biggest drag on growth was trade and lower government spending, as well as the largest surge in imports on record, it "suggests that the impact of US trade tariffs is impacting business behavior, with businesses front loading imports of goods to try and avoid reciprocal tariffs".
Many of the imports will make their way into inventories, "which can neutralize some of the effect of increased imports", Brooks says, and see "a payback" in future quarters.
A surge in imports of gold and silver doesn’t enter the GDP calculation, but is included in the import figures, so the surge in imports "is not all down to front loading of goods imports to avoid tariffs," said Brooks, "although that did happen last quarter."
Not all of the GDP report was bad news, either, said Brooks, with fixed investment growing 1.3%, personal consumption stronger than expected at 1.8% and real final sales to private domestic purchases up 3% compared to 2.9% growth rate in Q4 2024.
"This suggests that the US consumer and investment is holding up in the face of uncertainty and stock market declines, even if it has slowed in recent months."