US Economy Trade Tensions Trigger: GDP Contracts 0.5%!

The US economy is contracted by only 0.5% in the first quarter of 2025. Marking a notable drop then the 0.2% decline previously reported. It is a sign of the first contraction in the US economy in 3 years. The first quarter saw a decline in real GDP, driven by increased imports and decreased government spending. President Donald Trump’s trade wars have disrupted businesses, and the Commerce Department has confirmed this.

The decline reason has been detected as search in imports. The imports were nearly 38% year on year, household and business purchases ahead of President Trump’s tariff. This alone subtracted 4.7% points from GDP. Moreover, weak consumer spending, federal government spending and underlying the demand.

The quarter 2 or Q2 expects a strong bounce back, with GDP growth projected nearly 3%. But the risk remains elevated, this may be a technical rebound by import normalization.

The Q1 contraction reflects inventory frontloading, not a broad economic collapse. As inventory distortions fade, growth should pick up.

Some people speculate the matter ties into Donald Trump’s hypothetical interference in ceasefire situations involving India and Pakistan, and Iran and Israel. However, the situation is not directly connected to these speculations.

The primary reason for the slowdown is that tariffs imposed on various goods have created uncertainty and disrupted supply chains. Businesses are rushing to import goods before the new prices take effect.

Ongoing this, Trump announces that the US has signed a trade agreement with China and hinted that a “Very Big” trade deal could soon follow India.