The U.S. economy contracted for the first time in three years, with gross domestic product (GDP) falling 0.3% in the first quarter of 2025. The decline—driven by a surge in imports and a drop in federal spending—fueled market losses and intensified political finger-pointing in Washington.
President Donald Trump, now 100 days into his second term, quickly blamed the downturn on his predecessor.
Trump: “This is Biden’s stock market, not Trump’s”
In a Truth Social post, Trump claimed the decline had “nothing to do with tariffs” and instead blamed former President Joe Biden for leaving behind “bad numbers.” He urged Americans to “BE PATIENT,” insisting a major economic boom is still coming.
“Tariffs will soon start kicking in, and companies are moving into the USA in record numbers,” Trump wrote. “Our country will boom, but we have to get rid of the Biden Overhang.”
Economists, however, say that Trump’s new tariff regime is a major reason GDP turned negative.
What’s driving the GDP drop?
According to the U.S. Department of Commerce, the 0.3% annualized decline in GDP was primarily due to:
- A sharp increase in imports, as companies rushed to stock up ahead of new tariffs.
- A decline in federal spending, especially in defense outlays.
- Slower consumer spending compared to the previous quarter.
Consumer spending still rose, but more modestly. Americans spent more on healthcare and utilities, but durable goods purchases slowed. Analysts also noted that vehicle purchases surged in March, likely as buyers tried to beat anticipated price hikes tied to tariffs.
Meanwhile, the price index for personal consumption expenditures (PCE)—the Federal Reserve’s preferred inflation gauge—rose 3.6%, up from 2.4% in Q4 2024.
Private hiring slows sharply
Adding to the concern, private payrolls rose by just 62,000 jobs in April, well below the Dow Jones estimate of 120,000. It was the weakest month for hiring since July 2024.
Some analysts attribute the slowdown to uncertainty surrounding Trump’s economic policy, especially his sweeping new tariffs on Chinese goods and imports from key allies.
Trump’s economic narrative faces challenges
At a celebration marking his 100th day in office, Trump claimed prices were “coming way down” due to his policies. But the latest data tells a different story:
- Inflation is rising.
- Hiring is slowing.
- Growth is reversing.
“Now we’re plummeting toward a Trumpcession,” said Andrew Bates, a former Biden White House spokesman. “When Joe Biden handed Donald Trump the best-performing economy in the world, experts praised the U.S. for leaving every other wealthy nation ‘in the dust.’”
Not a recession—yet
Despite the contraction, most economists say the U.S. is not yet in a recession, which requires two consecutive quarters of negative GDP. Some key indicators remain strong:
- Real final sales to private domestic purchasers rose 3.0%.
- Business investment increased, particularly in inventories.
- Exports also grew, offsetting some of the import spike.
Still, the report underscores how fragile the economy has become in a highly politicized, tariff-heavy environment.
What’s next?
The next GDP update is scheduled for May 29. Until then, the White House will face growing scrutiny from Wall Street, business leaders, and voters.
Markets have already reacted, with stocks falling sharply after the GDP release. The economic numbers are expected to loom over Trump’s scheduled meeting with business leaders this week.
Stay with FingerLakes1.com for updates on GDP, inflation, job growth, and how Trump’s economic policies are reshaping the U.S. economy in real time.
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