The economy unexpectedly contracted 0.3% in the first quarter of 2025, a preliminary reading that is sure to rattle markets and is bad news for President Donald Trump.

The data, adjusted for inflation, were published Wednesday by the Bureau of Economic Analysis in its report for gross domestic product for the first quarter. This is the first of three revisions to the data in the coming weeks.

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The decline in GDP is a notable shift from the final quarter of last year, which saw economic output increase by a solid 2.4%. It also marks the only time — other than one quarter in 2022 — when the economy contracted since the pandemic.

The report will set off alarm bells for economists who fear that the uncertainty surrounding Trump’s tariff agenda could cause a recession in the coming months. Most economists expected for GDP to slow in the first quarter, but did not expect it to slow to the level of contraction.

One particularly notable dynamic is that GDP decline was in part due to people importing more goods in the first quarter in an attempt to get ahead of the Trump tariffs. Decreases in government spending were also behind the slump, according to the BEA.

These numbers are of particular concern for Trump because they capture the first quarter of his presidency and will set a benchmark for the coming four years.

Trump’s tariff agenda has taken center stage politically, and represents the biggest rework of global trade by the U.S. in modern history. The rollout has been panned by many economists, and markets have reacted poorly to not only the tariffs themselves, but also the uncertainty surrounding them.

They have also increased the odds of recession, many economists contend.

JPMorgan analysts put the chance of a global recession at 60% over the coming year if the tariffs are sustained. That is up from 40% before Trump announced the tariffs. Goldman Sachs also recently increased its projected odds of a recession from 20% to 45%.

It is complicated to gauge when recessions begin and end, but those in government and most economists look to the National Bureau of Economic Research, a private group, to declare one.

NBER defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months,” although there has been a historical precedent of labeling two consecutive quarters of negative economic growth recessionary. The periods feature rising unemployment.

The Federal Reserve has a complicated job right now. It has kept interest rates higher in order to quash inflation, although if GDP continues to soften it might be forced to lower rates in order to help stave off a recession.

TRUMP TARIFF INFLATION MAY NOT MATERIALIZE IF ECONOMIC OUTLOOK DIMS

Despite the concerns about the economy, there are some economic indicators that are still holding up.

For instance, layoffs remain extremely rare by historical standards, also, consumer spending has held up and retail sales this past month rose 1.4%, faster than expected. Inflation has also fallen in recent months, although some economists warn that it could tick back up with tariffs.