U.S. Economy Shrinks for the First Time in 3 Years at Start of Trump’s Second Term

News
Wednesday, April 30, 2025 - 13:01
Point Trader Group

The U.S. economy contracted in the first quarter of 2025 for the first time in three years, raising recession fears at the outset of President Donald Trump's second term, as he continues to wage trade wars with multiple countries.

Gross domestic product (GDP)—the total value of goods and services produced from January through March—fell at an annualized rate of 0.3%, according to a report released Wednesday by the Department of Commerce. This marks the first estimate for the quarter.

Economists had projected a modest growth of 0.2%, following a 2.4% expansion in the final quarter of 2024.

This downturn represents the first quarterly contraction in GDP growth since Q1 of 2022.

The decline was largely driven by a sharp increase in imports. In contrast, real final sales to domestic purchasers—a key measure of internal demand—rose at an annualized rate of 3% in Q1, slightly above the 2.9% recorded in Q4 of 2024.

Meanwhile, the core personal consumption expenditures (PCE) price index, which excludes volatile categories like food and energy, rose 3.5% during the first quarter. This surpassed forecasts of 3.2% and was notably higher than the 2.6% increase seen in the previous quarter.

The report captures economic activity for the period ending in March, which means it does not reflect the impact of new tariffs announced by President Trump on April 2. These measures pushed the effective tariff rate to its highest level in over a century.

Economists and Federal Reserve officials have warned that the new tariffs could fuel inflationary pressures and place additional strain on economic growth in the quarters ahead.


Related Topics

REQUEST A CALL BACK

Get financial advice from Point Trader Group experts.

YOU CAN TRUST POINT TRADER GROUP

For free expert financial advice.