US Q1 GDP Contracts 0.2% Less Than Estimated Amid Tariff Impact

The U.S. economy contracted at an annualized rate of 0.2% in the first quarter of 2025, a slight improvement from the initially reported 0.3% decline, marking the first quarterly GDP contraction since 2022. The decrease was primarily driven by increased imports and reduced government spending, partially offset by higher investment, consumer spending, and exports. This contraction reflects the ongoing impact of trade policies, including tariffs that have led to surging imports as businesses and consumers adjust their purchasing behavior. The GDP price index rose by 3.7%, indicating inflationary pressures despite the economic slowdown. Economists view GDP as a key indicator of economic health, with a decline often signaling reduced currency strength, although inflation and interest rate dynamics play crucial roles in broader economic outcomes. The revisions to GDP data highlight the challenges in accurately assessing economic activity amid shifting trade and policy conditions.