Trade Deficit Delivers Record Blow to US Economy as GDP Falls 0.2%

The US economy contracted by 0.2% in the first quarter of 2025, slightly better than the initially reported 0.3% decline.

Consumer spending, which drives most economic growth, increased only 1.2% – the weakest pace in nearly two years.

The main drag on the economy came from trade, with net exports subtracting a record 5 percentage points from GDP as businesses rushed to import goods ahead of potential tariffs.

Corporate profits fell 2.9%, the largest drop since 2020. While some tariffs have been delayed or blocked, economists expect growth to rebound in the second quarter as import levels normalize.