• The US economy shrank by 0.5% in the first quarter of 2025, a worse outcome than earlier estimates.
• Surging imports before tariff implementation played a key role in the economic contraction.
• Consumer spending growth significantly declined from 4% to just 0.5%.
• Economists expect a rebound in GDP growth to about 3% in the second quarter of 2025.
• Key underlying economic measures showed a slowdown compared to previous quarters.

The U.S. economy experienced a contraction of 0.5% on an annual basis in the first quarter of 2025, marking the first decline in three years, as reported by the Commerce Department. This deterioration was attributed to President Donald Trump's trade wars, which caused a surge in imports as businesses and households rushed to acquire goods before tariffs took effect. The initial estimate had forecast a lesser decline of 0.2%, indicating a notable revision downward, according to South China Morning Post and CBS News.

The significant rise in imports, which was reported at a staggering 37.9%—the fastest pace since 2020—contributed nearly 4.7 percentage points to the GDP decline. This contraction also reversed a previous growth of 2.4% recorded in late 2024. In addition, consumer spending fell sharply to just 0.5% growth, which is a marked decrease from the 4% seen in the last quarter of 2024. Such spending habits are influenced by rising consumer anxiety surrounding the anticipated direct impact of tariffs on personal finances, according to India Times and South China Morning Post.

The revisions to GDP figures reflect not just the chaotic import surge but also a weaker underlying economic strength, as indicated by the "real final sales to private domestic purchasers," which rose at an annual rate of 1.9% from January to March. This number has notably declined from 2.9% percent in the previous quarter and signifies caution regarding consumer confidence. Federal government spending also saw a sharp drop of 4.6%%—the largest decline since 2022. Economists predict that the impact of the import influx will not continue into the second quarter, foreseeing an expected economic rebound to approximately 3% growth, according to CBS News, India Times, and South China Morning Post.