The US Economy Contracted 0.5% in Q1, Even As Trump’s Trade Wars Triggered a Historic Import Surge

When life gives you tariffs, companies stock up on lemons — and everything else. The US economy contracted at a 0.5% annual pace during the first quarter, reversing the 2.4% growth seen in late 2024 and marking the nation’s first economic decline in three years. The drop was steeper than first estimated, as businesses scrambled to import goods ahead of Trump’s tariffs.

• Import activity exploded by 37.9% at the fastest pace since 2020, as firms rushed to get foreign goods before potential tariffs, dragging GDP down by nearly 4.7 percentage points.
• Consumer expenditure decelerated sharply to just 0.5% growth compared to a 4% expansion in Q4 2024, while federal government spending plummeted at a 4.6% annual rate.

Rebound watch: Despite the concerning figures, FactSet forecasters project a strong rebound with 3% growth anticipated for the second quarter. The import surge that weighed heavily on first-quarter performance likely won’t repeat, as the mathematical impact of trade deficits on GDP calculations should normalize once the frontloading frenzy subsides. The April–June GDP report, due July 30, will reveal whether this economic hiccup was a temporary speed bump or the beginning of a prolonged slowdown.