The US economy unexpectedly shrank in the first quarter of 2025, as a rush of imports, driven by the anticipation of sweeping new tariffs, undermined domestic growth, AFP reported.
President Donald Trump, however, deflected responsibility, placing the blame on the policies of his predecessor, Joe Biden.
According to preliminary data from the US Commerce Department, GDP fell at an annualised rate of 0.3% in the first three months of the year.
This marked the first contraction in over two years, and fell well short of the 0.4% expansion economists had forecast.
The downturn was attributed mainly to a surge in imports, as businesses and consumers accelerated foreign purchases ahead of Trump’s tariff hikes.
At the same time, consumer and government spending declined, further weakening economic performance.
“The underlying cause here is the fear of tariffs, not weakness in demand,” noted analysts at Wells Fargo, who added that while recession risks have grown, this single quarter does not mark the start of a broader downturn.
President Trump, addressing a cabinet meeting, dismissed any link between the contraction and his policies.
“That’s Biden, that’s not Trump,” he said, while highlighting what he called a “whopping” 22% jump in domestic investment during the quarter.
The White House echoed his message, claiming GDP was “a backwards-looking indicator” and that the figures masked underlying economic strength under Trump’s leadership. But critics were quick to respond.
Senate Majority Leader Chuck Schumer said the contraction was a “blaring warning” that Trump’s “MAGA experiment” was putting the economy at risk.
Since returning to the office, Trump has introduced a baseline 10% tariff on most imports, with far steeper rates applied to Chinese goods, some exceeding 145%.
In response to market volatility and political pressure, the administration paused the tariff increases for 90 days for certain countries, though tensions with China have escalated.
Defending the tariffs, Trump said the country could afford to consume less. “Maybe the children will have two dolls instead of 30 dolls,” he quipped. “And maybe the two dolls will cost a couple of bucks more.”
Financial markets reacted with initial losses before recovering some ground, while oil prices continued to fall amid investor uncertainty.
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