US economy shrinks for first time in three years amid trade war


The US economy shrank at a 0.3 per cent annual pace from January through March, its first drop in three years.
It was slowed by a surge in imports as companies in the US tried to bring in foreign goods before President Donald Trump imposed massive tariffs.

The January-March expansion in gross domestic product — the nation’s output of goods and services — was down from 2.4 per cent in the last three months of 2024. Imports shaved 5 percentage points off first-quarter growth.

President Donald Trump holds a signed executive order during an event to announce new tariffs in the Rose Garden of the White House, Wednesday, April 2, 2025, in Washington. (AP Photo/Evan Vucci) (AP)

Consumer spending also slowed sharply. Federal government spending plunged 5.1 per cent.

But business investment rose at a 21.9 per cent clip as companies poured money into equipment. 

And a category within the GDP data that measures the economy’s underlying strength rose at a healthy 3 per cent annual rate from January through March, up from 2.9 per cent in the fourth quarter of 2024. 

This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.

Trump inherited a solid economy that had grown steadily despite high interest rates imposed by the Federal Reserve to fight inflation. 

His erratic trade policies — including 145 per cent tariffs on China — have paralysed businesses and threatened to raise prices and hurt consumers.



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