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US economy shrinks 0.3% in first quarter as Trump trade wars disrupt business

30 Apr 2025 3 minute read
US President Donald Trump. Image: Carl Court/PA Wire

Paul Wiseman, Associated Press

The US economy shrank at a 0.3% annual pace from January through March, the first drop in three years, as President Donald Trump’s trade wars disrupted business.

First-quarter growth was slowed by a surge in imports as companies in the United States tried to bring in foreign goods before Mr Trump imposed massive tariffs.

The January-March drop in gross domestic product (GDP) – the nation’s output of goods and services – reversed a 2.4% gain in the last three months of 2024.

Imports grew at a 41% pace, the fastest since 2020, and shaved five percentage points off first-quarter growth.

Spending

Consumer spending also slowed sharply – 1.8% growth from 4% in October-December last year.

Federal government spending plunged 5.1% in the first quarter.

Forecasters surveyed by the data firm FactSet had, on average, expected the economy to eke out 0.8% growth in the first quarter, but many expected GDP to fall.

Financial markets sank on the report.

But business investment rose at a 21.9% clip as companies poured money into equipment.

And a category within the GDP data that measures the economy’s underlying strength rose at a healthy 3% annual rate from January through March, up from 2.9% in the fourth quarter of 2024.

This category includes consumer spending and private investment but excludes volatile items such as exports, inventories and government spending.

Imports

The surge in imports – the fastest since 1972 outside Covid-19 economic disruptions – is likely to reverse in the second quarter, removing a weight on GDP.

For that reason, Paul Ashworth of Capital Economics forecasts that April-June growth will rebound to a 2% gain.

But many economists say that Mr Trump’s massive import taxes – and the erratic way he has rolled them out – will hurt growth in the second half of the year and that recession risks are rising.

Mr Trump inherited a solid economy that had grown steadily despite high interest rates imposed by the Federal Reserve to fight inflation.

His erratic trade policies – including 145% tariffs on China – have paralysed businesses and threatened to raise prices and hurt consumers.

There is potential evidence emerging that the solid job market, a pillar of the US economy during the pandemic recession, may be weakening.

On Wednesday, payroll provider ADP showed that companies added just 62,000 jobs in April, about half of what was expected, and down from 147,000 in March.

That could be a signal that businesses may be taking a more cautious approach to hiring amid uncertainty over tariffs.

Still, the ADP figures often diverge from the government’s jobs reports.

Employers in the education and health, information technology, and business and professional services industries all cut jobs.

Business and professional services include sectors such as engineering, accounting and advertising.

“Unease is the word of the day,” said Nela Richardson, chief economist at ADP.

“It can be difficult to make hiring decisions in such an environment.”


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Jeff
Jeff
3 hours ago

Amazon was going to put the trump tariff price cost on its products in the US and trump went ballistic. Bezos finding out what it’s like to appease a dictator and find out you are now trumps property. He will do you all the way down. Keep an eye on the container traffic through Los Angeles ports, looks to be nose diving. Biden left a thriving economy and trump has wrecked it and the nations rep on the world stage. Anyone checked on the UK mini trump, farage? Meanwhile ICE and doge continue to wreck the institutions, there is no… Read more »

Fi yn unig
Fi yn unig
3 hours ago

I caught some of Tronald Dumps’ speech last night and I’m as sure as I can be that every single sentence he spewed forth was a verifiable lie.

A.Redman
A.Redman
2 hours ago

.Must be “alternate facts” ?
Trump told everyone at his 100 day rally that everything was rosy and in fact he said he had got the highest approval rating of ANY US President’s first 100 days ever and they blindly believed him!!!
Welcome to the wonderful world of Trumpsvill!!!
.

Y Cymro
Y Cymro
2 hours ago

With Trump having a tantrum by throwing his dummy after the owner of Amazon Jeff Bezos considered adding the cost of his tariffs to products sold. Did he think Bezos was actually going to shoulder any increases to make him look good lol? Jeff Bezos is a rampant capitalist. He’s not amassed over £203.6 billion for nothing. America and its economy is going to hell on a hand cart.

Rob
Rob
1 hour ago

President Clinton once coined the phrase ‘Its the economy stupid’. Trump supporters are no only blinkered by also very selfish. No consideration for the cost of living that is going to affect ordinary working class Americans or the thousands of jobs that will be lost as a result of these ridiculous tariffs.

Jeff
Jeff
11 minutes ago

Looks like KS trying to get a golf open for trump in the UK.

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