The U.S. economy shrank in the first quarter as companies stocked up on imports, a sign that President Trump’s aggressive trade tactics are having an impact.
The Commerce Department report on gross domestic product found a 0.3% contraction versus 2.4% growth in the previous quarter.
Wall Street estimates had expected 0.4% growth for the quarter, so the report may fuel recession concerns. A recession is a period of economic and industrial decline generally defined as a fall in GDP in two successive quarters.
The GDP report reflects goods and services from January to March.
The report did not capture the “Liberation Day” tariffs that Mr. Trump announced at the start of April. He paused many of them a week later, though hefty levies on China remain.
Still, the GDP report period covers some of the tariffs Mr. Trump imposed earlier in the year, and consumer sentiment is down in recent surveys.
Government analysts pointed to a large uptick in imports as companies tried to get ahead of Mr. Trump’s sweeping tariffs. Imports subtract from GDP, so the trend may not weigh on growth in future quarters.
“Compared to the fourth quarter, the downturn in real GDP in the first quarter reflected an upturn in imports, a deceleration in consumer spending, and a downturn in government spending that were partly offset by upturns in investment and exports,” the report said.
Peter Navarro, a trade adviser to Mr. Trump, said the GDP decline should be interpreted as a one-off.
“What happened with the numbers today is we had a fairly extraordinary surge of imports that was totally driven by the rest of the world trying to get their products in here before the tariffs took full hold,” he told White House reporters. “So the great news about that is that’s a one-shot deal.”
A separate report from human resources management firm ADP showed that private hiring slowed in April. Companies added 62,000 jobs for the month, down from a revised total of 147,000 in March.
The GDP report was the first since the switch from the Biden administration to the Trump administration.
The Dow Jones Industrial Average slid about 400 points in early trading Wednesday along with other trade indexes in the red, prompting Mr. Trump to dub it “Biden’s Stock Market.”
Wall Street has been on a roller-coaster ride since Mr. Trump announced his tariff plans on April 2, with dramatic sell-offs and rallies depending on the news of the day.
Mr. Trump says his tariff plans are needed to recalibrate trade in favor of Main Street USA and a manufacturing sector that’s seen its jobs go overseas in recent decades.
He believes near-term turmoil will be worth the payoff as he uses tough tactics to negotiate down trade barriers in countries that sell plenty of products to U.S. consumers but don’t buy nearly as much from American producers.
Yet Mr. Trump, writing on Truth Social, also faulted his predecessor for negative economic indicators of late.
“Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers,” Mr. Trump posted on Truth Social early Wednesday. “Our Country will boom, but we have to get rid of the Biden ‘Overhang.’ This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers, but when the boom begins, it will be like no other.”
Likewise, Mr. Navarro said people should be patient as Congress works on a massive tax-cut bill.
“The idea that there’s a recession coming should be heavily discounted,” he said. “Because when we take into effect the tax cuts coming and the underlying strength of the economy, then I think all things … are good. So we felt really good about that [GDP] number, when you fully understand it.”
