While U.S. real gross domestic product (GDP) contracted in the first quarter of 2025, gross private domestic investment soared during the same period.
U.S. real GDP decreased at a rate of 0.3% in the first quarter of 2025, marking the first quarterly contraction since 2022, according to a report released on Wednesday by the Bureau of Economic Analysis (BEA). Still, private domestic investment in the U.S. notably surged during the first quarter of 2025, increasing 21.9%, the BEA reported.
The first quarterâs increase in private investment â which marked the highest rate since late 2021 â may have been partially driven by a 22.5% increase in Business spending on equipment, according to the BEA.
âThe Q1 GDP report suggests that the U.S. economy is slowing, not that it is contracting,â American Institute for Economic Research (AIER) Senior Research Fellow Paul Mueller told the Daily Caller News Foundation. âThere was reasonable growth in consumption and investment. The negative number was due primarily to a big increase in imports in anticipation of the tariffs. A silver lining is that government spending was not artificially stimulating this quarterâs numbers the way it has every quarter for the past four years.â
The first quarter GDP downturn comes after the U.S. economy grew by 2.4% in the fourth quarter of 2024, after increasing 3.1% in the third quarter of 2024, according to the BEA. Stocks fell on Wednesday after the GDP report was released.
âInvestment normally is thought of like if you build a home, thatâs investment, or if you build a new factory and fill it with equipment, thatâs an example of investment,â Richard Stern, an economist at the Heritage Foundation, told the DCNF. âHowever, investment also includes inventory changes. Obviously, inventory is normally a really small percentage of what is going on , but in this quarter, inventory is a crap ton of whatâs going on because people are flooding in imports and then putting them into warehouses.â
President Donald Trump has been moving to revamp Americaâs trade sector as part of his âAmerica Firstâ agenda, including by announcing massive tariffs on imported goods from a variety of foreign countries in April, which sent shockwaves through global markets.
âWhether U.S. GDP contracts in Q2 depends almost entirely on whether the Trump administration can nail down its tariff policies at a lower, stable rate,â Mueller told the DCNF. âIf they donât, the economy will likely contract. If they do, it will likely expand significantly.â
âPrivate investment is likely up due to expectations of deregulation, lower energy costs, and lower taxes,â Mueller added. âThe threat of tariffs may have some minor impact too.â
A slate of businesses and foreign countries have pledged to invest more money in the U.S. over the next several years following Trumpâs return to the Oval Office.
Trump blamed former President Joe Biden for handing him a bad economy in a Wednesday Truth Social post, claiming that the U.S. economy will âboom, but we have to get rid of the Biden âOverhang.ââ
âThis is Bidenâs Stock Market, not Trumpâs,â Trump wrote. âI didnât take over until January 20th. Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers. Our Country will boom, but we have to get rid of the Biden âOverhang.â 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!!!â
Recent polling has shown that many Americans disapprove of Trumpâs economic policies. A NPR/PBS News/Marist Poll survey published Tuesday showed that just 39% of Americans said they approved of the presidentâs approach to handling the economy during his second term.
Relatedly, A 55% majority of Americans said that Trumpâs actions on tariffs have been bad policy, with 28% saying they were good policy, and 17% saying they have been neither, according to a CNN poll conducted by SSRS released on Monday.
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