The US economy unexpectedly shrunk at the start of 2025. But that may not be the whole picture.  

America’s gross domestic product (GDP), which measures all goods and services produced in the US, decreased by 0.3 percent in the first quarter of 2025.

The GDP rating, calculated by the US Bureau of Economic Analysis, reached over 2.4 percent last quarter. 

Bankers thought the GDP would read at 0.4 percent, which would have been the slowest rate in years. 

Instead of just slowing down, US production entered negative territory due to increasing trade tensions, inconsistent policies, and concerns about a recession.

And markets are reacting negatively to the news: Nasdaq, S&P 500, and Dow Jones futures are all trading in the red. 

The tech-heavy Nasdaq is the hardest-hit so far. It’s trading at negative two percent.   

But the measure may not realize a huge shift in American spending. 

This decline in GDP doesn’t capture the complete impact of President Trump’s extensive ‘Liberation Day’ tariffs, which were implemented in early April and partially repealed a week later.

At the same time, US consumers have been racing to buy foreign-made goods ahead of the 10 percent tariffs, which are expected to drive up prices and squeeze household budgets. 

But purchases of imported items don’t boost GDP, meaning some recent spending isn’t reflected in the numbers. 

‘Imports were an enormous drag on Q1 GDP,’ Ryan Sweet, the chief US economist at Oxford Economics, said. 

‘GDP is backward-looking but there was some good news as real final sales to private domestic purchasers, the engine of the economy, posted a decent gain.’

Shoppers have flooded car dealerships, tech stores, and furniture retailers to scoop up lower cost, fan favorite products before their prices rise. 

Multiple companies are reporting their sales numbers from the same quarter this week and are releasing banner sales, especially on their foreign-made products. 

Dozens of companies have also removed their sales forecasts, saying there is too much recession uncertainty. 

Sweet said the US is not currently in a recession, but ‘risks are high between today and early next year.’ 

Several bankers have agreed that a recession is becoming increasingly likely. 

Earlier this month, analysts at JPMorgan Chase increased their recession likelihood to 60 percent. 

In March, Deutsche Bank put the chance of a recession at 43 percent.

Sweet says the new GDP numbers will put even more pressure on Federal Bank Chair Jerome Powell. 

Powell has steadily increased US interest rates to attempt to combat inflation. He set a goal of getting price increases to two percent after it spiked over nine percent in 2022. 

The inflation rate has slowed down since he slammed down increased interest on the US economy. But it hasn’t yet reached his goal. 

If US production continues its downward rate while inflation remains high, it will put the Fed’s monetary policy in the crosshairs of two opposite forces. 

Lowering interest rates could lead to higher inflation, but increase production. Keeping interest rates at the same level could slow inflation, but further hurt US production. 

Meanwhile, in a post on Truth Social, President Trump shirked responsibility for the GDP reading. 

‘This is Biden’s Stock Market, not Trump’s,’ he claimed in a post on Truth Social.

‘This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers, but when the boom begins, it will be like no other. BE PATIENT!!!’