WASHINGTON (AP) — The U.S. economic system shrank at a 0.5% annual tempo from January by way of March as President Donald Trump’s commerce wars disrupted enterprise, the Commerce Division reported Thursday in a downgrade from its earlier estimate.
First-quarter progress sank beneath a surge of imports as firms in the US rushed to herald international items earlier than Trump might impose tariffs on them. The Commerce Division beforehand estimated that the economic system fell 0.2% within the first quarter.
The January-March drop in gross home product — the nation’s output of products and companies — reversed a 2.4% improve within the final three months of 2024 and marked the primary time in three years that the economic system contracted. Imports expanded 37.9%, quickest since 2020, and pushed GDP down by almost 4.7 proportion factors. Shopper spending additionally slowed sharply.
And federal authorities spending fell at a 4.6% annual tempo, the most important drop since 1986.
Commerce deficits scale back GDP. However that’s only a matter of arithmetic. GDP is meant to rely solely what’s produced domestically, not stuff that is available in from overseas. So imports — which present up within the GDP report as client spending or enterprise funding — must be subtracted out to maintain them from artificially inflating home manufacturing.
The primary-quarter import inflow possible received’t be repeated within the April-June quarter and due to this fact shouldn’t weigh on GDP. In actual fact, economists anticipate second-quarter progress to bounce again to three% within the second quarter, based on a survey of forecasters by the information agency FactSet.
Thursday’s report was the Commerce Division’s third and remaining report on first-quarter progress. The primary have a look at April-June GDP progress is due July 30.
