US economy growth shrank 0.5% in first quarter as Trump's trade war weighs on nation's business

The US economy shrank at a 0.5 per cent annual pace between January and March in 2025 as President Donald Trump's trade war disrupted business in the nation, reported the news agency AP, citing the early estimates from the United States Commerce Department on Thursday, 26 June 2025. 

The growth in the US economy in the first quarter was weighed down by the rise in imports as corporations and individuals started to import foreign goods ahead of Trump tariffs, according to the agency report.

Earlier, the Department of Commerce estimated that the US economy is expected to fall 0.2 per cent in the January to March quarter of 2025. However, the report also showed that the economists have not made any changes to the third and final GDP estimates.

The first quarter gross domestic product (GDP) reversed a 2.3 per cent increase in the last quarter of 2024, marking that the US economy contracted for the first time in the last three years. The imports into the United States rose 37.9 per cent, and this contributed to the fall in the GDP rates to 4.7 per cent, according to the agency report. 

US Consumer spending

Consumer spending in the United States also slowed in growth at 0.5 per cent for the first quarter of 2025, compared to 4 per cent in the fourth quarter of 2024, according to the agency report.

A category which measures the economy's underlying strength was at 1.9 per cent annual growth rate in the Janaury to March quarter of 2025. However, this is down from 2.9 per cent levels in the fourth quarter of 2024, and from the Department of Commerce estimates of 2.5 per cent for the first quarter, as per the report.

Ryan Sweet of Oxford Economics, cited in the agency report, called the downgrade in the GDP rates “troubling” while keeping his near-term forecast for the US economy the same as before.

The federal government's spending witnessed the biggest fall since 2022, at 4.6 per cent annual pace in the Janaury to March quarter of 2025.

The April-May quarter GDP data is set to come out on July 30, according to the agency report. The news report also suggested that the GDP is supposed to count only domestic production and not the items imported from abroad.

They also cited FactSet data and said that the GDP growth rate for the April to may quarter of 2025 is expected to be 3 per cent.