Latest estimates by the Bureau of Economic Analysis (BEA) demonstrate a 0.2 per cent contraction during the first quarter of 2025, as the United States economy continues to struggle.

According to the bureau’s second estimate, the US gross domestic product (GDP) went down at an annual rate of 0.2 per cent in the first quarter of 2025, while the first estimate was at minus 0.3 per cent. The BEA reports that the decline in the GDP primarily reflects an increase in imports and a decline in government spending, adding, “these movements were partly offset by increases in investment, consumer spending, and exports.”

The GDP was revised up 0.1 percentage points from the advance estimate, reflecting an upward revision to investment that was partly offset by a downward revision to consumer spending. US consumers hit the brakes in April while goods imports plummeted by a record as companies adjusted to higher tariffs.

Weaker consumer spending 

The contraction in the economy was restrained by weaker consumer spending and an even bigger impact from trade than initially reported. The economy’s primary growth engine — consumer spending advanced 1.2 per cent, down from an initial estimate of 1.8 per cent and the weakest pace in almost two years.

Meantime, net exports subtracted nearly five percentage points from the GDP calculation, slightly more than the first projection and the largest on record. Economic growth was dragged down at the start of the year by a surge in imports as US businesses tried to get ahead of President Donald Trump’s ‘Liberation Day’ tariffs. 

The BEA says there was more moderate consumer spending, as well as a decline in federal government spending, also weighed on the figure. Since then, the White House has walked back or delayed some of the more punitive levies, and most of the tariffs have been blocked by a US trade court.

While the pauses have helped calm Americans’ concerns about the economy and prompted many economists to scrap their recession calls, tariff rates are still substantially higher than before Trump took office.  

Forecasters largely expect GDP to rebound in the second quarter as higher duties discourage imports, and the goods already brought in will accumulate in larger inventories that add to growth. 

Beyond that, economists and policymakers will be paying close attention to how Trump’s policies, including trade but immigration and taxation, will impact consumer and business spending going forward. In the meantime, inflation-adjusted personal spending rose 0.1 per cent after rising 0.7 per cent a month earlier, BEA data showed.