US Economy Contracts 0.3% in Q1, First Drop in Three Years

The U.S. economy contracted at a 0.3% annualized rate in the first quarter of 2025, marking its first decline since 2022 and falling short of economists' expectations for growth. The contraction was primarily driven by a surge in imports, as businesses sought to stock up ahead of anticipated tariffs under President Donald Trump's trade policy, resulting in a record goods trade deficit. While consumer spending and final sales to domestic purchasers continued to grow moderately, concerns over tariffs have heightened uncertainty for businesses and consumers, leading to reduced business sentiment, falling consumer confidence, and volatility in financial markets. Major companies have cited the unpredictable tariff environment as a challenge for planning and have adjusted financial forecasts accordingly. Inflation rose more than expected in the quarter, and both economists and the Federal Reserve anticipate further inflationary pressures and potential impacts on growth in the coming months. The downturn, which coincided with the early days of Trump's new administration, has reinforced public anxiety over the economic outlook.