US Economy Sees Sharp Drop in GDP Growth Rate

The US economy experienced a sharp decline in the first quarter of 2025, with a GDP annualized rate of -0.3%, marking the worst quarter since 2022, driven by a wider trade deficit, cutbacks in government spending, and a slowdown in consumer spending.

The decline in GDP was largely attributed to a significant increase in imports, which skyrocketed from -1.9% in the fourth quarter to 41.3% in the first three months of 2025, while exports registered at a 1.8% rate. This trade deficit subtracted from GDP, which was the biggest drag on growth in the first quarter. Additionally, the inflation rate took a sharp upswing, with the Personal Consumption Expenditures price index rising 3.6% for the quarter.

President Trump dismissed the report, attributing the decline to the transition of power from his administration to Biden's. However, economists are divided on whether this signals a recession, with some saying it's too early to call one, while others warn that the economy is on a "razor-thin edge" and the longer tariffs remain in place, the more likely a downturn is. Business investment, however, increased at a 9.8% rate, but most of this came from businesses building up inventories ahead of tariffs.

The National Bureau of Economic Research is the official arbiter of recession, but its call can come many months after a recession has officially started. As the US economy navigates this uncertain terrain, policymakers and economists will be closely watching the upcoming quarters to determine the trajectory of the economy and whether the recent decline is a sign of a larger trend.