First GDP Report of Trump's Term Shows a Tariff Impact

Surge of imports to get ahead of tariffs contributes to GDP decline
By Newser Editors and Wire Services
Posted Apr 30, 2025 8:50 AM CDT
Imports Surged in Q1—So the Economy Shrank
Shipping containers are seen ready for transport at the Guangzhou Port in the Nansha district in southern China's Guangdong province, April 17, 2025.   (AP Photo/Ng Han Guan, File)

The US economy shrank at a 0.3% annual pace from January through March, the first drop in three years, as President Trump's trade wars disrupted business. The January-March drop in gross domestic product—the nation's total production of goods and services—reversed a 2.4% gain in the last three months of 2024. More:

  • Expectations: Forecasters surveyed by the data firm FactSet had, on average, expected the economy to eke out 0.8% growth in the first quarter, while CNBC reports economists surveyed by Dow Jones were anticipating a 0.4% gain. But the sentiment had started to change in recent days, with some expecting GDP to fall due to a surge in imports as companies tried to source goods before Trump's tariffs hit in full force.
  • Imports: Indeed, imports grew at a 41% pace, the fastest since 2020, and the fastest since 1972 outside COVID-19 economic disruptions. That's likely to reverse in the second quarter, removing a weight on GDP. As CNBC explains, "Imports subtract from GDP, so the contraction in growth may not be viewed as negatively given the potential for the trend to reverse in subsequent quarters."
  • Still: One economist sees little in the way of silver linings. Chris Rupkey of fwd: Bonds tells CNBC, "Maybe some of this negativity is due to a rush to bring in imports before the tariffs go up, but there is simply no way for policy advisers to sugar-coat this. Growth has simply vanished."
  • Counterpoint: Shannon Grein, an economist at Wells Fargo, tells the Wall Street Journal, "The headline decline overstates weakness because a lot of that was tariff-induced pull-forward. Overall, I think that it was a relatively solid underlying report when it comes to demand."
  • Other figures: Consumer spending also slowed sharply, to 1.8% growth from 4% in October-December last year. Federal government spending plunged 5.1% in the first quarter. But business investment rose at a 21.9% clip as companies poured money into equipment.
  • Whiffs of job-market strife: There is potential evidence emerging that the solid job market, a pillar of the US economy during the pandemic recession, may be weakening. On Wednesday, payroll provider ADP showed that companies added just 62,000 jobs in April, about half of what was expected, and down from 147,000 in March. That could be a signal that businesses may be taking a more cautious approach to hiring amid uncertainty over tariffs. Still, the ADP figures often diverge from the government's jobs reports.
(More GDP stories.)

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