U.S. Economy Shrinks 0.5% in Q1 2025 Amid Consumer Spending Decline

The U.S. economy contracted at a 0.5% annual rate in the first quarter of 2025, marking the first decline in three years, largely attributed to weaker consumer spending and disruptions caused by President Donald Trump's aggressive tariffs on imports. Consumer spending growth slowed significantly to 0.5%, down from an earlier estimate of 1.2% and a robust 4% in the previous quarter, as businesses and households rushed to import goods ahead of tariff impositions, creating volatility in trade data. Imports surged nearly 38%, the fastest since 2020, which reduced GDP by almost 4.7 percentage points and contributed to the economic downturn. Despite the GDP contraction, a rebound is forecast for the second quarter, with the Atlanta Federal Reserve projecting 3.4% growth, though economists caution this may reflect inventory adjustments rather than genuine economic strength. The tariff-related uncertainty has shaken consumer confidence and investor sentiment, with global organizations like the OECD and World Bank revising growth forecasts downward, while hopes for a US-China trade deal and a 90-day tariff pause offer some potential relief. Overall, the economic dip highlights the profound impact of trade tensions on domestic economic activity and global markets, emphasizing the need for cautious policy and business strategies moving forward.