US economy shrunk by 0.5% from January to March, experts cited Trump's trade policy as the reason

The US Commerce Department announced on Thursday that GDP for the first quarter of 2025 (January-March) contracted 0.5%, which was worse than before. Previously, GDP was assumed to fall 0.2%, but fresh statistics have reported a higher decline. Experts on the matter consider that corporations and individuals, fearing imposition of tariffs (customs duties) and because of US President Donald Trump's policies on trade, have increased buying foreign goods at a faster rate, and hence, imports increased 37.9% which was the highest since 2020. It led to a fall of GDP of about 4.7 percentage points.

If seen, consumer spending, which is considered the backbone of the US economy, is also considered to be the main reason for the decline in GDP. Consumer spending in the US grew by only 0.5% in the first quarter, while it was 4% in the last quarter of last year. The Commerce Department had earlier estimated that this figure would be higher, but now it has shown a decline.

Not only this, but there was also a decline in basic economic strength. The reason for this is that there has been a decline in that part of GDP, i.e., consumption and private investment combined, but excluding exports, government spending, and stocks. This part grew by 1.9% in the first quarter, while the previous estimate had shown a 2.5% increase. Analyst Ryan Sweet called it worrying, but said it would not have much impact on his future economic forecast for the time being.

According to experts, federal government spending also declined by 4.6% in the first quarter, the biggest decline since 2022. However, economists believe this decline is temporary. The economy is expected to grow by 3% in the April to June quarter. The data for this quarter will be released on July 30.