The United States economy shrank in the first quarter of 2025, marking a 0.3% annual decrease in gross domestic product (GDP), according to the U.S. Bureau of Economic Analysis (BEA). This contraction follows a 2.4% growth in the fourth quarter of 2024, raising concerns about a potential recession amid ongoing trade tensions.
The BEA reported that the decrease in real GDP was driven primarily by an increase in imports and a decrease in government spending. Imports, which are subtracted in the calculation of GDP, surged as companies stockpiled goods in anticipation of future tariffs. This led to net exports subtracting a record 4.83 percentage points from GDP.
Consumer spending, which accounts for about two-thirds of the U.S. economy, grew at a slower pace of 1.8%, down from a 4.0% rate in the previous quarter. Federal government spending also decreased by 5.1%, further contributing to the economic slowdown.
Economists are divided on what this means for the economy’s future. Analysts from Wells Fargo noted, “The U.S. economy is at a greater risk of recession now than it was a month ago, but this 0.3% contraction in Q1 GDP is not the start of one.” They attribute the contraction to sudden changes in trade policy affecting net exports.
Former U.S. Treasury Secretary Lawrence Summers criticized current economic policies, stating on social media platform X that the first hundred days have been “disastrous” for the economy. He cited declines in stock markets, the dollar, and consumer confidence, as well as increased forecasts of unemployment and inflation.
Justin Wolfers, an economist at the University of Michigan, pointed out that the chances of a recession have risen sharply. “When the current administration returned to the White House, chances of recession were probably about 10%. Now, they’re up to around 55%,” he told Fox News. “The only thing that’s happened that has pushed the odds of a recession up so high, so fast, is chaos coming from out of the White House,” Wolfers added.
Uncertainty over trade policies continues to affect businesses and investors. Many companies are struggling to make financial projections due to the unpredictable nature of tariffs and trade negotiations. “The situation remains unpredictable and that is problematic for companies trying to plan ahead and investors looking for stability,” reported The Associated Press.
As trade tensions persist, economists warn that continued uncertainty could further slow economic growth in the coming quarters. Without a clear resolution to trade disputes, the risk of a recession may continue to grow, impacting not just the United States but economies around the world.
