People shop for groceries at a store in New York, the United States, on March 28, 2025. (Photo by Michael Nagle/Xinhua)

"The U.S. economy is at a greater risk of recession now than it was a month ago, but this 0.3-percent contraction in Q1 GDP is not the start of one," Wells Fargo economists wrote in an analysis.

WASHINGTON, April 30 (Xinhua) -- U.S. 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 U.S. Bureau of Economic Analysis (BEA).

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.

RECESSION RISK

"The U.S. economy is at a greater risk of recession now than it was a month ago, but this 0.3-percent contraction in Q1 GDP is not the start of one," Wells Fargo economists wrote in an analysis.

"It reflects instead the sudden change in trade policy that culminated in the biggest drag from net exports in data going back more than a half-century," they argued.

But some economists are more pessimistic about the prospect of a recession, citing the Trump administration's expansive tariffs on many trading partners.

U.S. President Donald Trump shows an executive order on "reciprocal tariffs" at the Rose Garden of the White House in Washington, D.C., the United States, on April 2, 2025. (Xinhua/Hu Yousong)

Adam Posen, president of the Peterson Institute for International Economics (PIIE), recently put U.S. recession risk at 65 percent, highlighting U.S. policy uncertainty.

"I expect sour consumer sentiment and business uncertainty to drag down Q2," Gary Clyde Hufbauer, a non-resident senior fellow at the PIIE, told Xinhua, adding that he is predicting a recession in the second half of this year.

The Kobeissi Letter, a financial publication, noted that preliminary GDP growth in the first quarter came in at negative 0.3 percent, below expectations of 0.3 percent. "This marks the lowest and first negative GDP reading since Q2 2022. GDP contraction in the US has begun."

"Multiple indicators are now showing a recession to the base case expectation in 2025," the Kobeissi Letter said.

DISASTROUS 100 DAYS

Former U.S. Treasury Secretary Lawrence Summers, who is Harvard University professor, blasted the administration's economic policies.

"This has probably been the least successful first hundred days of a presidency @realDonaldTrump on the economy in the last century," Summers wrote in a post on social media platform X.

"We have seen the stock market go down, the dollar go down, forecasts of unemployment go up, forecasts of inflation go up, forecasts on the odds of a recession go up. We've seen consumer confidence collapse. We've seen businesses take back all their previous earnings projections. So, this has been a disastrous hundred days for the US economy," said Summers.

Darrell West, Brookings Institution Senior Fellow, told Xinhua that the drop in first quarter GDP is "bad news" for Trump.

"He told voters he would be great at managing the economy but that has not been the case. He inherited a strong economy from Biden and has run it into the ground through misguided policies. If the second quarter number comes in negative, it will be known as the Trump recession," said West.