US economy contracts 0.3% in Q1 2025; Donald Trump blames it on Biden ‘Overhang’
US GDP contracts: The American economy saw an unexpected contraction during the first quarter of 2025, primarily attributed to increased imports as businesses and individuals built up inventories before US President Donald Trump’s comprehensive tariffs took effect.
According to figures released by the US Commerce Department on Wednesday, the GDP of America’s economy declined at an annual rate of 0.3 percent in the first quarter, following a 2.4 percent growth in the last quarter of 2024. This performance fell considerably short of market expectations, which had predicted a 0.4 percent growth, as reported by Briefing.com.
“The downturn in real GDP in the first quarter reflected an upturn in imports, a deceleration in consumer spending, and a downturn in government spending,” the Commerce Department said in a statement.
The economic news triggered a negative response in US stock markets, with significant early declines observed across all three main Wall Street indices.
Blame it on Biden? Trump thinks so!
In a Truth Social platform post, the US president dismissed claims about the economic downturn, shifting responsibility to his predecessor Joe Biden.
“This is Biden’s Stock Market, not Trump’s,” the US president wrote in a post on his Truth Social platform. “Our Country will boom, but we have to get rid of the Biden ‘Overhang.'”
“This will take a while, has NOTHING TO DO WITH TARIFFS,” he said. “When the boom begins, it will be like no other. BE PATIENT!!!”
Subsequently, in a CNBC interview, Trump’s economic adviser Peter Navarro addressed the GDP decline, attributing it to pre-tariff import activities.
“When you have this import surge that we’ve had to try to get in ahead of the tariffs, that’s dragging down our GDP growth by something like five percent,” he said. “I mean, it’s just like extraordinary.
“But that’s not going to be the case next quarter,” he added.
Since returning to office on January 20, the US president has implemented various tariff measures. In March, he announced comprehensive tariffs targeting major trading partners, scheduled to begin in early April, aiming to restructure US trade relationships. The GDP figures were released on his 101st day in office.
Tariff sword hangs
The implementation of tariffs triggered a market selloff, with volatility reaching unprecedented levels since the Covid-19 pandemic, causing investor uncertainty.
“Usually, government policy doesn’t change that much, particularly not in the first 100 days of a presidency,” George Washington University economics professor Tara Sinclair told AFP before the data was published. “But this one’s different.”
“I think it’s pretty clear that there were dramatic policy changes that are directly weakening the economy,” she said.
“100 days into his presidency, Donald Trump’s red-light, green-light tariffs are shrinking our economy, with businesses stockpiling imports in anticipation of tariff doomsday,” Democratic Senator Elizabeth Warren said in a statement after the GDP data was published.
The impact of tariffs on economic growth and inflation presents a challenge for the Federal Reserve in its mission to maintain price stability and optimal employment levels, according to MBA chief economist Mike Fratantoni in a note to clients shared with AFP.
“We expect that the Fed will hold rates steady at its meeting next week and will indicate that it will continue to hold at this level until it becomes clear whether a recession or inflation is the bigger risk,” he said.
