Kathmandu. The US economy unexpectedly shrank in the first three months of 2025, the latest data released on Wednesday showed.
The US Commerce Department estimates that the contraction in the economy may have been due to a surge in imports before US President Donald Trump imposed a sweeping tax hike. The world’s largest economy’s gross domestic product, which grew by 2.4 percent in the last month of 2024, fell by an annualized 0.3 percent in the first quarter, the ministry said. Wednesday’s figure was below market expectations for a 0.4 percent increase, according to Briefing.com.
The Commerce Department said in a statement that “the decline in real gross domestic product in the first quarter reflected a surge in imports, a decline in consumer spending, and a slowdown in government spending.”
The figures were released on the 101st day since Trump returned to office on Jan. 20. During this time, he announced plans to impose sweeping tariffs on top trading partners starting in early April to restore US trade relations, announcing a series of tariff hikes in March. The introduction of those tariffs sparked a sell-off in financial markets, pushing volatility to its lowest since the COVID-19 pandemic and spooking investors. “Usually, especially in the first 100 days of a president, there’s not much change in government policy, but this is different,” Tara Sinclair, an economics professor at George Washington University, told AFP. “I think it’s pretty clear that there were dramatic policy changes that are directly hurting the economy,” she said.
After a dramatic stock market decline in April, which was criticized for Trump’s policies, the Trump administration announced a 90-day pause on higher tariff increases for dozens of countries to allow for trade talks, keeping the base rate at 10 percent for most countries. It has announced sector-specific measures on steel, aluminum and automobiles and parts not made in the United States, and new broad tariffs totaling 145 percent on China. In response, Beijing imposed tough and targeted tariffs on American goods.
The U.S. economy grew 2.8 percent last year, according to the Commerce Department. At the start of the new year, analysts had forecast economic growth of around 2 percent in 2025. Since Trump’s return to the U.S. presidency and new tax hikes, many analysts have sharply revised down their growth outlook. Imports have a negative impact on growth and offset the positive impact of exports on the gross domestic product. “This increase in imports is coming from people trying to get ahead of these direct taxes and is a direct response to the president’s policies,” said Sinclair of George Washington University. The ministry said, “Increases in investment, consumer spending and exports have partially offset the decline in imports.”
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