Associated Press Economics Writer Paul Wiseman
The US economy shrank at a 0.3% annual pace from January to March for the first time in three years, as President Donald Trump’s trade war disrupts businesses. First quarter growth was slowed by a surge in imports as US companies tried to bring in foreign goods before Trump imposed a massive tariff.
From January to March, gross domestic product declines – national goods and services production – reversed an increase of 2.4% over the past three months of 2024. Imports have grown at a 41% pace, the fastest since 2020, cutting 5% points from first quarter growth. Consumer spending also slowed sharply. Growth grew from 4% to 1.8% from last October to December. Federal spending plummeted 5.1% in the first quarter.
Forecasters surveyed by the Factset data company had predicted, on average, that the economy would drive 0.8% growth in the first quarter, but many expected GDP to decline. Financial markets have sunk into the report.
However, business investments rose at a clip of 21.9% as businesses poured money into their equipment. Categories in GDP data, which measure the underlying strength of the economy, rose at the healthy 3% annual rate from January to March, up from 2.9% in the fourth quarter of 2024. This category includes consumer spending and private investment, but excludes volatile items such as exports, inventory and government spending.
The surge in imports – the fastest outside of Covid-19 economic turmoil since 1972 – is likely to turn back in the second quarter and remove GDP weight. So, Capital Economics’ Paul Ashworth predicts that growth from April to June will recover to 2% profit.
But many economists say Trump’s massive import taxes (the unstable way he deployed them) have hurt growth in the second half of the year, increasing the risk of a recession.
Trump inherited a steady, steady economy despite the high interest rates imposed by the Federal Reserve to combat inflation. His volatile trade policies, including a 145% tariff in China, have threatened to paralyze businesses, raise prices and hurt consumers.
There is potential evidence that the solid job market, a symptom of the US economy’s dependence during the pandemic recession, may be weakening.
On Wednesday, the Payroll Provider ADP added just 62,000 jobs in April, down about half of what was expected, down from 147,000 in March. It could indicate that businesses may be taking a more cautious approach amid uncertainty about tariffs. Still, ADP figures are often split from government work reports.
Employers in the education and health, information technology, and business and professional services industries are all cutting jobs. Business and Professional Services include sectors such as Engineering, Accounting, and Advertising.
“Anxiety is the word of the day,” said Nera Richardson, ADP chief economist. “Making employment decisions in this environment can be difficult.”
AP Economics Writer Christopher Al Gerber contributed to this report.
Original issue: April 30, 2025 9:02am EDT
