According to CNBC, GDP fell by 0.3% in the first quarter of 2025, due to excess imports into the United States because of Trump’s new tariffs. During this time, imports increased 41.3%, due to the 50.9% increase in goods.
GDP (gross domestic product) is a combination of all of the goods and services that the United States produces, and imports subtract from the gdp, which is why gdp fell during the first quarter of this year.
This marks the first quarter with negative growth in 3 years; the last one was in quarter 1 of 2022. This decrease may cause the Federal Reserve to consider lowering interest rates, but inflation might make them think otherwise.
This quarter also marks the start of Trump’s trade war, which could be costly for the country.
In quarter 4 of 2025, GDP rose by 2.4%, and some economists had hoped for a 0.4% increase for the start of 2025, but the opposite was actually the case. More recently, other economists projected the future GDP to decrease due to rising imports, because companies and firms wanted to buy as much as they could before Trump’s tariffs took effect in April.
Because imports subtract from GDP, it is likely that future quarters will have less negative growth or positive growth. This is because companies will likely stop buying as many things from other countries when the reciprocal tariffs officially take effect after their 90 day hold. Until those 90 days are up, though, Trump has put a universal 10% tariff on all countries, except China which is over 100%.
Consumers spent less this quarter than in the past, but spending still remained positive. This, and Musk’s reduced spending in the Department of Government Efficiency have also contributed to this low GDP number.
Consumer spending recorded a 1.8% increase in quarter one, down from 4% last quarter. Quarter 1’s increase marks the lowest since Quarter 2 of 2023. However, one report projected a 0.5% increase in March, which actually turned out to be 0.7%.
Private investment within the country rose 21.9%, in part by the 22.5% soar in equipment spending likely due to tariffs.
The federal government spent 5.1% less during this time, and this, by itself, decreased GDP by 0.33%.
Inflation increased this quarter to 3.6%, up from 2.4% in quarter 4 of 2025.
The chain-weighted price index, which accounts for many factors, such as consumer behavior, went up by 3.7%, while 3% was projected.
In March, inflation was higher than expected, at 2.3%.
The employment cost index of the Bureau of Labor Statistics rose 0.9%, just as predicted.
More jobs are being added to the economy, and consumer spending is still up, but low GDP marks could mean a possible recession soon and bad looks for Trump.
Traditionally, a recession is considered a consecutive 2 quarter decrease in gdp. The National Bureau of Economic Research defines it as a drastic economic decline nationwide that lasts for more than a few months.
Payroll results meant that 62,000 new jobs were created by private hiring during April, but Markets will have to wait until May 2 for BLS nonfarm payroll data to be released.
