U.S. Economy Contracts in Q1 2025 Amid Import Surge and Trump Tariff Anticipation; Trump Shifts Blame to Biden

The US economy is backing down the first three months of 2025, marked the first recession in three years as businesses scrambled in imports in front of new tariffs announced by President Donald Trump.

The unexpected collapse of the Gross Domestic Product (GDP), down 0.3% on an annual basis, will only come months in Trump's second term, deepening anxiety in his trade policies and motivating the market's fresh jitters.

On Wednesday, the Commerce Department reported that the GDP, the widest metric of economic activity, refused for the first time since the first quarter of 2022. Analysts expect to grow 0.4%, especially after a stronger than expected 2.4% expanding in Q4 2024. Quarterly increases outside the Covid-19 Era since the 1974 territory, reducing more than five percent points from the headline number.

While trading swings are known to be known as PABAGU -new and often reversed in subsequent dwellings, the data has sent alarm alarms to be raised on Wall Street. Stock futures are sinking, and Treasury's yields climb up after liberation. Surprising the surprise also came up with a political blow, as Trump prepared for further trade battles.

Trump blames Biden for retreating – and more to come

At a time of cabinet meeting after the report was released, Trump quickly moved himself to the economic setback, tired of his predecessor, Joe Biden.

“This is Biden,” Trump declared. “And you can also say that the next quarter is a type of biden because it doesn't just happen on the day -to -day or one -time basis.”

Trump pointed to the timing of his inauguration, asserting that the economy was still operating at the momentum of the biden period when negative numbers were formed.

“We took, all of us, together, we entered on January 20th,” he said. “The stock market in this case tells how serious the situation we inherited.”

Comments followed a post on social fact in which Trump tried to restore the fall as a symptom of democratic mismanagement.

“This is Biden's stock market, not Trump. I don't care until January 20th,” he wrote. “The tariffs are about to start to kick in, and the companies are starting to move to the USA with the record numbers. Our country will soak, but we have to remove the 'overhang.'”

Trump added: “It will last, nothing to do with tariffs, only that he has left us a bad number, but when the boom starts, it will be like no one else. Be patient !!!”

However, the destruction of the Commerce department is opposed to Trump's claims. The data point directly to the economic impact of his own policy – specifically, a tariff plan presented in advance in April. Announcement leads to imports to rush to foreign goods to avoid higher duties, trading deficiency blooms and drags GDP.

Tariffs and trade shocks shape the quarter

Imports of goods rose nearly 51%, as businesses rushed to defeat the start of 10% in full-board tariffs that Trump introduced to US trade partners. Although the tariffs eventually paused for a 90-day negotiation window, a move yet to yield deals, the early announcement still triggered a scramble in the global supply chains. Exports, by comparison, rose only 1.8%.

Consumers' spending, which usually activates the US economy, has also slowed down sharply. Personal consumption expenditures rose 1.8%, down from a 4% increase in the previous quarter. This is the slowest speed of consumer growth since mid -2023, although monthly data from March has shown a moderate rebound with a spending of 0.7%, leading expectations.

However, private domestic investment, has offered a rare bright spot. The investment rose 21.9%, mainly driven by a 22.5% jump with equipment purchases-likely another response operating on expected tariffs.

The federal government's spending also contracted, falling 5.1% amid President Trump's early push for tightening the budget through the efficiency of the government department led by Elon Musk. The rejection shave about one-third of a percentage point in GDP.

Economists warned deeper risks

“Perhaps some of this negativity is due to a rush to bring imports before the tariffs climb, but there is no way for policy advisers to be sugar.

Robert Frick, a corporate economist with the Navy Federal Credit Union, said the data was about, especially the slippery spending of the consumer, but not yet a catastrophe.

“What is more than a number for the future of expansion is consumer spending, and it has grown, but at a relatively weak speed,” he said. “That's about, but not stressful because it may be due to bad weather and a spending at the end of last year.”

However, Frick said, however, the headline shrinkage sets a stressful tone for the second quarter, especially if Trump's tariffs remain in the area beyond the 90-day suspension.

Inflation is the fed outlook complicated

The economy report also brings a problem for the Federal Reserve ahead of next week's policy meeting. GDP data usually strengthen arguments for cutting interest rates to stimulate growth, but inflation measures have moved to Q1, emitting doubts about how fast the Fed is.

The index of personal consumption (PCE), the Fed's preferred size, rose to 3.6%, from 2.4% to the previous quarter. The Core PCE, which washed food and energy, rose 3.5%, suggesting a constant underlying price pressure. A broader inflation measure, the price index weighted chain, increased 3.7%, which is more than 3% forecast.

Later in the day, the Commerce department noted that the March's PCE price index rose by 2.3% year -old, while the Core PCE was in line to 2.6%.

Despite those figures, the markets still estimated that the Fed was prioritizing growth, pricing at a rate cut to the June meeting and expecting many four cuts by the end of the year.

The Jobs Report on the next critical trial

While the economy is still increasing jobs, with working costs rising 0.9% last quarter, slowing down GDP increases concerns about whether the labor market can continue to break the broader pace. On Wednesday, the Payroll Processor reported that 62,000 private sector hires in April, less in recent months.

The closer the Nonfarm Payroll reported was due on Friday and could play a key role in shaping the sentiment of the White House market and messaging.

Recalling puts Trump in a specific place: launching aggressive trading steps intended to boost the American industry while leading an economic backward. And as the president quickly pointed to the finger on the biden, economists pointed squarely on Trump's own policies as an immediate pullback cause.