The American economy witnessed a 0.3% contraction in the first quarter of this year, in the first quarterly decline since 2022, driven by an unprecedented increase in imports with American companies’ efforts to anticipate the expanded customs duties imposed by President Donald Trump.
According to the initial estimates issued by the US Department of Trade Economic Analysis, the gross domestic product on an annual basis decreased by 0.3%, exceeding the expectations of analysts who estimated 0.3%growth. The economy recorded a growth of 2.4% in the last quarter of 2024.
Imports burden the local product
Data seen by Bloomberg Agency indicated that the net exports cut about 5 percentage points from the gross domestic product in the first quarter, in the largest negative impact registered ever.
American imports increased in the first quarter of 2025 on an annual basis by 41.3%, which is the highest jump in about five years, as a result of companies rushing towards securing foreign goods before the new customs duties flow. Since these goods are not produced within the United States, they are deducted from local product.
The “Bloomberg Economics” report said that this rush “reveals a direct impact of Trump’s commercial policy on economic activity,” adding that the shrinkage of growth came despite the continued local demand indicators.
Spending consumers and government slowdown
The spending of consumers, which represents about two -thirds of GDP, contributed to growth by 1.8%, the weakest level since mid -2023, but is still better than expectations. However, the slowdown of spending was clear, especially in light of the decrease in consumer confidence and the decline in sales of some major companies such as “Wrbul” and “Tracter Splai”.
On the other hand, government spending decreased by 1.4%, in the first decline since 2022, amid 8% reducing the defense after President Trump temporarily suspended military aid to Ukraine last month.
Inflation and monetary policies
The report also revealed the acceleration of the basic inflation rate to 3.5% in the first quarter, which is the highest in a year. The federal reserve is awaiting more data before making decisions regarding interest rates, especially in light of the ambiguity that surrounds the full effects of customs duties on the economy and inflation.
The data indicates that the actual customs duties rate in the United States is currently about 23%, which is the highest in more than a century, according to Bloomberg Economics. These increases come within the framework of Trump’s endeavor to revive the manufacturing sector, enhance exports, achieve a trade surplus, and increase government revenues.
Is the recession waving on the horizon?
With fears of the impact of fees on supply chains and high prices, many analysts believe that the possibilities of the United States enter into an economic stagnation during the next year are close to supporters and opponents.
The “Bloomberg” report indicated that some data indicate that companies have stored imports, which may provide a batch of growth in the second quarter by reducing the trade deficit and increasing the stock. Nevertheless, fears of continued slowdown are still exist.
The expected monthly job report is expected to show a slowdown in the frequency of employment, with data revealed a weak increase of only 62,000 jobs in April, the weakest performance since last July.
While President Trump boasts that the fees will enhance manufacturing and push the economy towards a “strategic recovery”, preliminary indicators show that the American economy is going through a real test moment – a test that may determine the features of the coming months, especially in light of the increasing political and financial challenges, and the escalation of anticipation in global markets.
Source : Associated Press + Al Jazeera + Reuters + Bloomberg
