The American economy decreased during the first months of President Donald Trump’s second term as a burst of uncertain tariff proposals for companies and consumers.
The American gross domestic product, or GDP, decreased at an annualized rate of 0.3% over three months ending in March. The figure has marked a net drop of 2.4% growth in the last three months of 2024.
GDP measurement has dropped largely due to an increase in imports while companies store inventory to avoid large -scale prices. Before the publication of data, analysts warned that a drop in GDP due to this trend would not reflect economic weakness.
Reading has arrived below what most economists expected.
The government’s GDP formula subtracts imports to exclude foreign production from the calculation of total goods and services.
Imports increased by more than 40% at the start of this year, while businesses rushed to inventory in the United States before potential prices, according to data. On the other hand, federal expenses fell by approximately 5% in the first three months of 2025.
The drop in GDP “mainly reflected an increase in imports”, as well as a drop in public spending, said the US trade department.
The data cover a period before the entry into force of the so-called Liberation Day rates in early April.
Analysts largely expected a sharp drop in economic performance at the start of this year, although they did not agree on the gravity of the slowdown.
“We are planning a slowdown marked in the American economy during the first quarter, driven by the increase in the uncertainty of policies surrounding trade, prices and immigration”, s& P Global Ratings declared in a note to customers.
The data would probably be biased by a flood of imports while companies were trying to get around the prices, s& P Global Ratings said. The measurement of GDP deduces imports to exclude foreign goods and services, so that a vagueness of occasional import could blur the conclusion.
“Reading the GDP in the first quarter may not provide a faithful reflection of the underlying economic conditions because it is considerably influenced by the download of imports”, s& P Global Ratings said.
President Donald Trump looks, the day he welcomes the winner of the Super Bowl Lix, the NFL Philadelphia Eagles champion on the South White House lawn in Washington, DC, April 28, 2025.
Leah Millis / Reuters
Many observers define a recession through the metric serme of two consecutive quarters of decline in GDP adjusted by the inflation of a nation. The National Office of Economic Research, a research organization responsible for officially identifying a recession, uses a more complicated definition which is based on a range of indicators.
Despite the feeling of consumer feeling and current market disorders, certain key measures in the economy remain fairly strong.
The unemployment rate is at a historically low level and employment growth remains robust, although it has slowed down previous summits. Meanwhile, inflation was cooled in March, which increases the prices well below a peak reached in 2022, showed the data.
Robust data offers the best partial reassured, some economists said in ABC News.
Measures of the economy such as inflation and hiring are published a month after collecting data, and they often reflect slow moving changes in business or consumers’ behavior, economists said. Consequently, such measures can be exceeded, especially when the economy is evolving.
Speaking at the Chicago Economic Club earlier this month, the president of the Fed, Jerome Powell, recognized the “solid condition” of the American economy, but he warned against the signals of a potential slowdown.
“Life is evolving fairly quickly,” said Powell.
