The Incoming Recession: Are Imports the Real Culprit?

The preliminary estimates for real GDP growth in the first quarter of 2025 show an annualized contraction rate of 0.28 percent, along with an extraordinary increase in imports of 41.3 percent. Most commentators rushed to indicate that the contraction was due to the rise in imports, as, for instance, with the recent Reuters headline stating "GDP contraction driven by record trade gap due to import surge." It is true that imports have surged, especially taking advantage of the "de minimis" exemption for Chinese goods that came to an end at midnight on Friday, May 2, 2025. The de minimis exemption allows goods worth $800 or less to come into the United States almost duty-free, without inspections and with very little paperwork. These small shipments under the de minimis exemption accounted for over 1.36 billion shipments in the fiscal year 2024--more than double the number four years earlier, according to the US customs agency. This extraordinary type of imports represents, according to The Guardian, "more than 90% of all the cargo entering the US. About 60% of those packages come from China."