In the first quarter of 2025, U.S. economic growth slowed sharply as businesses rushed to stockpile goods ahead of President Trump's extensive tariff policies.
The country's GDP – the total value of products and services – was 0.3%, down from a 2.4% increase in the last three months of 2024, the Commerce Department reported on Wednesday. This was the worst quarterly performance of the U.S. economy since early 2022, when the economy was spread throughout the pandemic during the Volume Guard period.
According to an average estimate by economists surveying the facts, the U.S. economy is forecast to show a 0.8% growth in the first three months of 2025.
Some economists increase opportunities in the U.S. amid growing concerns that Mr. Trump’s widespread tariffs could undermine the U.S. economy Slide into recession In 2025. Although the Trump administration's blanket tariffs are Announced on April 2 - After the quarter ends - Businesses are trying to lead the impact of import duties by preinstalling at the beginning of the year.
Economists warn that the report may not fully reflect the status of economic growth, noting that the numbers may be noisy as imports surge as businesses try to surpass tariffs. Economists point out that an increase in imports appears to lower economic growth and show a shift with domestic consumption, but that doesn't tell the whole story.
Experts say concerns about tariffs have led businesses and consumers to change their behavior at the start of the year, suggesting that the rollout of sharp import fees could bring headwinds to the economy later in 2025.
“This artificial front load of demand lays the foundation for the sharp demand cliff in the second quarter, a more disturbing phase of the ongoing economic slowdown,” EY chief economist Gregory Daco said in an email.
According to Capital Economics, companies may receive a second-quarter increase in the current quarter due to the company's launch in the year and the pre-load at the beginning of the year.
Another key measure of economic health, known as the final sales of private domestic buyers, also grew 3% in the first quarter, from 2.9% in the first three months. This shows that despite the concerns about the economy, demand from consumers and businesses remains resilient.
"Overall,[GDP data]is not as bad as you fear, although some imports of the second-quarter import volume will now be partially offset by the slowdown in inventory accumulation," analysts at the investment consulting firm said in a note. "We forecast an annual rebound of 2.0% for GDP in the second quarter."
The Ministry of Commerce said the increase in imports in the first quarter and government spending fell by 5.1%.
Mr. Trump’s government efficiency ministry, led by billionaire Elon Musk, effectively shut down major institutions such as the Consumer Financial Protection Bureau Thousands of federal workersand canceled funds for health and scientific research.
Economists expect the U.S. economy to slow down in 2025, partly because of the impact of Mr. Trump’s tariffs are driven by import tariffs paid by U.S. companies such as Walmart or Target. When faced with higher tariffs, companies often transfer all or some of the expenses to shoppers, which may depress consumers’ spending.
GDP growth is expected to slow to 1.9% in 2025, according to Factset. That's from 2.8% in 2024.
"
Factset data shows that Friday's monthly employment report is expected to indicate that employers created 135,000 new jobs, slowing down from 228,000 jobs in March.
David Russell, head of global market strategy at trade company TradeStation, said in an email that the combination of ADP data, GDP reports and other economic data “increasingly suggests that the recession may have begun.”
Experts say shaky economic data could convince the Fed to delay more tax cuts. The central bank will make its next rate decision at its May 7 meeting, with most economists predicting the Fed will keep its benchmark rate stable.
"The data are clearly delaying the cuts; they are likely to continue their waiting methods to assess the inflationary shocks caused by tariffs announced in April," Olu Sonola, head of U.S. economic research at Fitch Ratings, said in an email.