The US economy shrank unexpectedly in the first quarter of 2025, as a wave of imports, prompted by President Donald Trump’s sweeping new tariffs, dragged on growth, AFP reported.
But the president deflected blame, accusing former president Joe Biden of sowing the seeds of the downturn.
Data from the US Commerce Department showed GDP contracted at an annualised rate of 0.3% between January and March, sharply below expectations of 0.4% growth.
It marked the first quarterly contraction since 2022, following a 2.4% expansion in the final months of last year.
The decline was driven largely by a sharp rise in imports, as businesses and consumers rushed to buy foreign goods ahead of Trump’s tariff hikes, introduced earlier this month.
The Commerce Department also cited weaker government and consumer spending.
Despite the surprise downturn, Trump focused on a “whopping” 22% rise in gross domestic investment, and blamed Biden-era policies for the GDP dip.
“That’s Biden, that’s not Trump,” he said during a cabinet meeting.
The White House echoed that message, calling GDP a “backwards-looking indicator” and insisting that “the underlying numbers tell the real story of the strong momentum President Trump is delivering.”
Markets initially slumped on the news, with all three major Wall Street indices falling before ending mixed. Oil prices extended their losses.
The figures arrived on Trump’s 101st day back in office, alongside fresh signs of slowing inflation, potentially easing pressure on the Federal Reserve.
Top Senate Democrat Chuck Schumer condemned the downturn, saying: “This decline in GDP is a blaring warning… the failed MAGA experiment is killing our economy.”
Trump recently introduced a 10% baseline tariff on most imports, with some duties on Chinese goods now reaching 145%.
The White House has since paused tariff increases for 90 days on select countries to allow for trade talks, though Beijing has responded with retaliatory measures.
“Maybe the children will have two dolls instead of 30 dolls,” Trump said, defending his strategy. “And maybe the two dolls will cost a couple of bucks more.”
Economists at Wells Fargo noted the risk of recession has risen but said the Q1 contraction reflects a sudden trade shock, not a broader downturn.
