US economy in Q1 shrinks at annual rate of 0.3 pct

WASHINGTON -- US gross domestic product (GDP) shrank at an annual rate of 0.3 percent in the first quarter of this year, amid new tariff policies that have increased uncertainty and dampened confidence.

The latest figure follows a 2.4 percent GDP growth in the fourth quarter of 2024, according to the US Bureau of Economic Analysis.

In an advance estimate, the report said that the decrease in real GDP in the first quarter primarily reflected an increase in imports, which are a subtraction in the calculation of GDP, and a decrease in government spending. These movements were partly offset by increases in investment, consumer spending and exports.

Net exports subtracted 4.83 percentage points from GDP, the most on record, the report showed, indicating companies' efforts to stockpile amid concerns about higher tariffs in the future.

Consumer spending, which accounts for two-thirds of GDP, grew at a 1.8 percent pace, much slower than the 4.0 percent rate in the fourth quarter of 2024. Consumer spending added 1.21 percentage points to the GDP in the first quarter.

Federal government spending shrank by 5.1 percent, subtracting 0.33 percentage points from GDP in the first quarter.

Trump has slapped many trading partners with tariffs, to the chagrin of many economists who believe the increased duties will spark an economic slowdown.

"The tariff show is creating enormous uncertainty among CEOs — they are worried not only about their own supply chains and customers, but also impacts elsewhere in the economy," Gary Clyde Hufbauer, a non-resident senior fellow at the Peterson Institute for International Economics, told Xinhua.

"So, they delay investment decisions. Meanwhile, consumer confidence has fallen off a cliff. I expect consumers to postpone big-ticket purchases," Hufbauer said, adding that the combination implies a recession in the second half of this year.