The U.S. economy contracted in the first three months of 2025, fueling recession fears at the start of President Donald Trump’s second term in office as he wages a potentially costly trade war.

Gross domestic product, a sum of all the goods and services produced from January through March, fell at a 0.3% annualized pace, according to a Commerce Department report Wednesday adjusted for seasonal factors and inflation.

Economists surveyed by Dow Jones had been looking for a gain of 0.4% after GDP rose by 2.4% in the fourth quarter of 2024. However, over the past day or so some Wall Street economists changed their outlook to negative growth, largely due to an unexpected rise in imports as companies and consumers sought to get ahead of the Trump tariffs implemented in early April.

Indeed, imports soared 41.3% for the quarter, driven by a 50.9% increase in goods. Imports subtract from GDP, so the contraction in growth may not be viewed as negatively given the potential for the trend to reverse in subsequent quarters. Imports took more than 5 percentage points off the headline reading.

Consumer spending slowed during the period but was still positive. Personal consumption expenditures increased 1.8% for the period, the slowest quarterly gain since Q2 of 2023 and down from a 4% gain in the prior quarter.

Moreover, private domestic investment soared during the period, rising 21.9%.

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