The American economy shrank by 0.3 percent during the first quarter of this year, marking the first drop in three years as President Donald Trump’s tariff policies disrupted businesses and their supply chains.
The tariffs imposed on other countries have created uncertainty among both businesses and consumers. The economy, as a measure of GDP, shrank in part because of a rise in imports as companies stockpiled goods to avoid Trump’s tariffs.
Imports increased more than 40 per cent as federal spending fell about five percent during the first three months of the year. The Commerce Department said the decrease in GDP “primarily reflected an increase in imports” and a decrease in government spending.
Before the figures were released, analysts noted that a decreasing GDP figure because of this trend would not show economic weakness; however, the number was lower than most economists projected.
The number released covers a time period before Trump’s so-called Liberation Day, when he announced widespread tariffs on allies and foes alike.
This marks the worst quarter for the U.S. economy since 2022, when the country was still heavily affected by the Covid-19 pandemic. Comparatively, the economy grew by 2.4 percent in the fourth quarter during the final months of President Joe Biden’s term in office.
Before the release of the fresh economic numbers, analysts broadly expected a decline in performance at the beginning of the year. However, they disagreed on how much the economy would slow down.
S&P Global Ratings told clients in a note that “We anticipate a marked slowdown in the U.S. economy during the first quarter, driven by increasing policy uncertainty surrounding trade, tariffs, and immigration,” according to ABC News.
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