Crisis ahead? The first GDP report of the Trump era reveals a drop in the US economy

The Bureau of Economic Analysis (BEA) reported on Wednesday that in the first quarter of 2025, the US GDP shrank by 0.3 percent.

One of the main ways economists evaluate whether the economy has entered a recession is by monitoring GDP, with two consecutive quarters of negative GDP growth.

Although the White House has rejected the notion that its policy of tariffs is responsible for the slowdown, many experts are pointing to the significant increase in imports, which subtract from GDP, as retailers prepared for the tariffs. Compared to the first quarter of 2024, imports were up 13.4%, with demand for goods pushing the total figure up, which also points to businesses looking to stock up, while tariffs remained low.

Major retailers, including Walmart and Target, have warned the White House that tariffs at their current level, particularly the 145 percent duty placed on most goods from China, could lead to empty shelves across the country.

This comes as major banks and international financial organizations have increased the likelihood of recession in their forecasts. However, many, including the International Monetary Fund, still believe it was more likely that the US economy would be able to avoid a downturn in 2025.

The White House responds to the Q1 GDP report

In a cabinet meeting on Tuesday morning, the president told the media present that his tariff policy would lead to growth in GDP as companies began to re-shore production. However, that doesn’t mean the economy won’t enter a recession as that process takes place, and though unemployment remains at a historically low level, joblessness could rise rapidly if businesses expect a slowdown and adjust down their revenue expectations. Additionally, higher tariffs mean higher prices, as companies can choose to pass the increase in cost to the consumer.

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