US Economy Contracts In Q1, First In 3 Years

The US economy contracted for the first time in three years during the first quarter, overwhelmed by a flood of imports as businesses rushed to avoid higher costs from tariffs—underscoring the disruptive effects of President Donald Trump’s often chaotic trade policy, Lucia Mutikani reported for Reuters.

Consumer confidence is near five-year lows, and business sentiment has deteriorated sharply.

Trump won reelection last November largely on voter concerns over the economy, particularly inflation. Consumer confidence is near five-year lows, and business sentiment has deteriorated sharply.

Airlines have pulled their 2025 financial forecasts, citing uncertainty about nonessential travel spending due to tariffs, which economists say will increase costs for both companies and households.

“If the blowout on trade was the result of firms pre-buying imported inputs to beat the tariffs, the decay in the trade balance will reverse in the second quarter,” said Carl Weinberg, chief economist at High Frequency Economics.“However, corrosive uncertainty and higher taxes—tariffs are a tax on imports—will drag GDP growth back into the red by the end of this year.”

Gross domestic product decreased at a 0.3% annualized rate last quarter, the first decline since Q1 2022, according to the Commerce Department’s Bureau of Economic Analysis (BEA) in its advance estimate.

The decline was also attributed to a drop in federal government spending, likely tied to the Trump administration’s aggressive funding cuts, which have included mass firings and the closure of numerous programs.