U.S. Q4 GDP grows only 1.4%. Economists warn: recession risk is higher than expected!

This Friday, the latest data released by the U.S. Bureau of Economic Analysis showed that by the end of 2025, the U.S. economy is experiencing a sharp slowdown, with the initial quarter-over-quarter annualized GDP growth rate dropping to 1.4%. This decline is mainly due to tariff policies and a government shutdown lasting several weeks, which weakened the previous growth momentum.

According to the latest data, the U.S. economy grew by 2.2% overall last year, below the 2.8% growth in the previous year. Meanwhile, despite the impact of tariffs under Trump, U.S. imports still increased last year, and the trade deficit continued to expand.

At the same time, U.S. federal government spending has decreased, partly due to the longest government shutdown in history that began in October last year and lasted 43 days.

However, these cuts were largely offset by strong household spending. Despite weak tariffs and wage growth weakening Americans’ financial situation, they remain eager to consume.

“This is simply incredible: American consumers have continued to spend,” said Tara Sinclair, Chair of the Economics Department at George Washington University. “We know people are not optimistic about the economic outlook, but that hasn’t really led them to reduce consumption.”

However, economists warn that the U.S. economic outlook may be more fragile than it appears.

“The economic situation looks relatively stable, but a closer look reveals considerable instability,” said Luke Tilley, Chief Economist at Wilmington Trust. He estimates the likelihood of a recession in the U.S. in the future at about 45%, “When we see extremely slow job growth and consumers defaulting on credit cards, mortgages, and auto loans, it’s clear the economy has become quite weak.”

These complex signals in the economy pose additional challenges for the Federal Reserve’s future path. Last year, the Fed lowered borrowing costs three times but has currently paused further rate cuts until it can better gauge inflation and the labor market trends.

Economists also say it’s premature to completely dismiss the economic impacts of tariffs and immigration slowdown. Some cite the “gradual effects” of Brexit as an example: after Brexit, the economy did not suddenly collapse but gradually dragged down productivity, employment, and investment, with the UK’s economy continuing to decline over the next decade.

Sinclair stated, “We spent a lot of time emphasizing, ‘Oh, look, we’re not in a recession, so these tariffs and immigration policies probably won’t impact the economy’… but these policies are fundamentally changing the economic structure. In the long run, this could mean we’ll experience a decade of growth worse than originally expected.”

(Source: Caixin Global)