The U.S. economy contracted at an annualized 0.3% rate in the first quarter, as a rush to import goods ahead of President Trump’s tariffs weighed on economic growth, the Commerce Department said on Wednesday.
Why it matters: It’s the first contraction in three years, a sign that the economy was losing momentum before the highest tariffs took effect.
Flashback: It is a sharp turnaround from the 2.4% growth rate in the final months of 2024.
- It is the weakest GDP print since the same period in 2022, when the economy contracted at a 1% annualized rate, similarly weighed down by volatile categories like trade and inventories.
The big picture: The GDP data covers the Jan.-March period, though trade tensions intensified shortly thereafter.
- The White House imposed a 10% universal tariff in April, alongside steep reciprocal tariffs that were later paused for 90 days.
- But it ramped up its crackdown on U.S.-bound Chinese goods with a levy of 145% that prompted retaliation. That has choked off trade between the two nations.
What’s next: In some ways, the White House appears to be softening its approach, with tariff concessions for the auto industry and some electronics.
- But there is no clear path for lower tariffs, with mixed messages about whether the White House is engaged in trade negotiations with China.
The bottom line: The fate of economic growth might largely rest on White House trade policy, assuming no other economic shocks down the line.
