Economy shrank 0.2% in the first quarter, updated GDP shows, as trade wars sapped U.S. growth

The U.S. economy contracted by 0.2% in the first quarter of 2025, according to an updated GDP report, slightly better than the initially reported 0.3% decline. The Bureau of Economic Analysis attributed the contraction to ongoing trade disputes negatively impacting U.S. growth, though a partial rebound is expected in the second quarter.

Analysis

The U.S. economy experienced a contraction in the first quarter of 2025, with Gross Domestic Product (GDP) declining at an annualized rate of 0.2%, according to a revised estimate from the Bureau of Economic Analysis. This figure represents a marginal improvement from the initially reported 0.3% decrease but confirms the underlying negative impact of persistent trade disputes on U.S. economic growth, aligning with the 'Tax & Tariffs' and 'Trade Policy & Supply Chain' themes. The 'moderately negative' sentiment score of -0.4 reflects this economic headwind. Despite the Q1 downturn, a partial rebound in economic activity is anticipated for the second quarter, though the persistence of trade frictions remains a key variable influencing the outlook.

Key Decisions for Investors

• Investors should closely monitor upcoming trade policy announcements and negotiations, as these are identified as the primary factor impacting U.S. GDP.
• Consider adjusting exposure to sectors highly sensitive to international trade and economic cyclicality, given the confirmed Q1 contraction and its root causes.
• Maintain a degree of caution regarding the Q2 outlook; while a partial rebound is forecast, its strength and sustainability will depend on evolving trade dynamics and subsequent economic data releases.