US economy shrinks for first time since 2022 as Trump tariffs rattle markets

The American economy was shrinking in the first quarter of 2025, which represents its first decrease since early 2022, as increasing imports preceding the new President Trump’s tariff that has fallen from production.

GDP (GDP) decreased by 0.3 % on an annual basis between January and March, according to the US Economic Analysis Office (Bea), and ends a period of strong growth after birth. The number was worse than a decrease of 0.2 % expected by analysts and a sharp reflected of 2.4 % growth in the previous quarter.

The cause of contraction was significantly due to an increase of 41.3 % in imports, as companies rushed to store foreign goods before the complete definitions. Since imports of GDP were offered, this boom had a negative impact on growth numbers. The trade deficit of American commodities also achieved a record in March.

Wall Street’s reaction was sharply to the news, with early losses through the main indicators. However, the markets stabilized steadily: Dow Jones increased by 0.4 %, the S& P 500 index increased by 0.2 %, and the Nasdaq Stock Exchange regained a sharp drop to the end by only 0.1 %.

Economists believe that the recession may be temporary. Paul Ashworth of the Capital Economics noted that increasing import already reflects, which “should enhance GDP in the second quarter.” James Knightley said that companies “are strongly trying to bring the largest possible number of commodities before the tariff.”

The contraction coincides with the display of the “Tahrir Day” tariff plan, which was announced on April 2. The plan imposes a 10 % tariff on all imports, 145 % fees on Chinese goods, and additional fees for the sector. Trump later delayed the implementation of most of the customs tariffs for 90 days, but the main charges remain in place.

Despite the contraction, Trump blamed his predecessor for a social position of the truth:

“This is the stock market market in Biden, not Trump. It has nothing to do with definitions.

In addition to the economic opposite winds, it was a decrease in government spending, partially linked to a sharp decline in public sector employees supervised by Elon Musk, head of the Ministry of Government efficiency (Doge).

The main investment banks, including Goldman Sachs, JP Morgan and Morgan Stanley, reduced the classification of growth forecast in the United States. JP Morgan now sees a 60 % chance of stagnation in the coming months.

Inflation also showed signs of re -acceleration. The basic personal consumption expenses (PCE), which is the preferred inflation scale in the Federal Reserve, increased to 3.5 %, an increase of 2.6 % and higher than expected.

Meanwhile, the eurozone economy achieved a rare bright point, as it grows by 0.4 % in the first quarter, and doubled the pace of the previous quarter. Germany and France avoided the recession by a slight difference, supported by interest rates by the European Central Bank and a new 500 billion euro investment plan announced by the adviser in Germany, Fredres Mirz.

However, analysts have warned that the Trump tariff – which is currently under the European Union at a rate of 10 % and may rise to 20 % – may weigh European growth in the future. Christophe Boutcher of Ibn Aro described the latest data of GDP in the eurozone as a “good surprise”, but he warned her, “Do not take into account the shock of” Tahrir’s Day “.

Since global markets adapt to Trump’s protectionist policies, economists closely monitor signs of deeper disruption – and whether American contraction represents an edge or a wider slowdown.