The U.S. economy contracted early this year as businesses imported a massive trove of goods before President Donald Trump's sweeping tariffs took effect, widening the trade deficit and curtailing growth.
U.S. gross domestic product, the value of all goods and services, shrank at an 0.3% annual rate in the first three months of the year, down from a 2.4% increase at the end of last year. Stocks slid early Wednesday on the news.
The report showed the first decline in the U.S. economy in three years.
Trump blamed former President Joe Biden for the downturn in a post on Truth Social, urging Americans to "BE PATIENT!!!"
Excluding the tariff effects, the underlying economy turned in a solid showing in the first quarter despite tumbling consumer confidence and rising business uncertainty over the import fees. But forecasters expect the economy to slow dramatically later this year, with many predicting a mild recession, as the duties boost prices and hamper spending.
"A period of stagnation now likely lies ahead if the current set of tariffs is maintained, with recession the most likely outcome if the additional reciprocal tariffs are imposed in full in July," Pantheon Macroeconomics wrote in a note to clients. Trump's sweeping levies on dozens of nations were paused for 90 days to allow for negotiations.
Economists saw both good and bad tidings in the GDP report, which seemed to show an import-driven decline overlaid against an otherwise sound economy.
"The economy weakened in the first quarter," said Bill Adams, chief economist at Comerica Bank, in written comments. "Businesses and consumers pulled forward purchases to get ahead of tariffs in the first quarter, and throttled back spending and investment plans in other areas."
A dramatic surge in imports "puts an asterisk on today's negative first quarter GDP release," said Peter Graf, chief investment officer at Nikko Asset Management Americas. At the same time, Graf said, the tariff reaction "shows how dramatically government policy expectations can drive real-world business decisions. Companies got ahead of possible tariffs by building inventories, just as they are now likely getting ahead of a possible policy-driven recession by reducing hiring and investment."
An economic decline in the midst of an expansion "is unusual," but "it's not unheard of, and the economy isn't in a recession," said Ryan Sweet, chief U.S. economist at Oxford Economics.
Allies of former President Joe Biden fired back after Trump tried to blame the plunging stock market under his watch on his predecessor.
The S&P 500, which tracks the stock performance of 500 leading companies, grew by 14% annually during Biden's four years in the White House, including by 23% in 2024 and 24% in 2023.
During Trump's first 101 days of his second term, the S&P 500 is down about 8%.
"When Joe Biden handed Donald Trump the best-performing economy in the world, experts praised the U.S. for leaving every other wealthy nation 'in the dust,' said Andrew Bates, former Biden deputy press secretary. "Now we're plummeting toward a Trumpcession."
He added: "Donald Trump is the only president to have sent a strengthening economy into a nosedive in 100 days, and the only president to have bankrupted a casino."
In the same vein, some economic forecasters faulted the Trump administration over the GDP numbers, which came after a long span of economic growth under Biden.
"If you were looking for a playbook on how to slow a healthy economy, this seems like a good example," said Scott Helfstein, head of investment strategy at Global X.
- Joey Garrison and Daniel de ViseĢ
Responding to the economic growth report, White House trade adviser Peter Navarro said the influx in imports was an anomaly caused by tit-for-tat tariffs that he expects to reverse in the next quarter and contribute to long-term economic growth.
"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," Navarro told reporters at the White House, referring to it as a "one-shot" deal.
Navarro said the tax bill Republicans in Congress are working to pass would also stimulate domestic investment. The bill would include 100% expensing for equipment and buildings in the U.S., a valuable tax write-off for businesses.
Like the president, Navarro pointed the finger at former President Joe Biden, calling the economic situation "fruit of that poison Biden tree" that Trump has been stuck with.
"He didn't leave us with a very good hand," Navarro said of Biden. "Right now, we see things improving. We see our policies being put into action."
Experts blamed the GDP decline on a trade imbalance from an unprecedented surge in imports in early 2025, as traders rushed to stock up ahead of sweeping tariffs imposed by the Trump administration.
Trade data from January showed that the U.S. imported more goods than in any other month since the Census began tracking the numbers in 2002, hitting a record $320 billion and driven by sharp increases in products from China, Canada, and Mexico, which together supply nearly half of the nation's foreign goods.
The trend continued in February, with imports remaining near record levels at over $290 billion - a 21% increase from February 2024 - as tariff fears persisted. Despite a brief pause on Canadian and Mexican tariffs, uncertainty kept importers scrambling to secure goods before further hikes, experts told USA TODAY. China's tariffs rose from 10% to 20% in early March, and by mid-March, some rates on Chinese goods had skyrocketed to 145%.
As early as December 2024, as Trump vowed to impose new tariffs upon taking office, China reported that its exports to the U.S. had peaked at $48.8 billion, the highest monthly total for 2024. Experts told USA TODAY then that the spike was likely related to anticipated tariff hikes. The Census is scheduled to release trade data for March on May 6.
Trump blamed his predecessor for the tariff-induced economic slowdown in the first three months of the year, calling it the "Biden Overhang," a day after he completed 100 days in office. Biden's last full day in office was Jan. 19.
"This is Biden's Stock Market, not Trump's. I didn't take over until January 20th," Trump posted on Truth Social. "Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers."
Trump urged patience from Americans.
"Our Country will boom, but we have to get rid of the Biden "Overhang," he wrote. "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. BE PATIENT!!!"
Stocks are trading lower Wednesday morning as investors react to a spate of negative economic news and trade war comments from earnings releases.
The blue-chip Dow was 1.4% lower, giving up 569 points to trade near 39,958, while the broad S&P 500 fell 1.7%, losing 92 points to about 5,469. The tech-heavy Nasdaq slid 2.1%, down 64 points near 17,096 at midmorning. The 10-year U.S. Treasury note was unchanged at 4.171%, but the VIX, which is often known as Wall Street's "fear gauge," surged 15%.
Some stocks were sharply lower after earnings releases that included comments about tariff woes. Super Micro warned its fiscal third quarter results would miss analysts' expectations as customers delayed platform decisions. The stock was 17% lower. Meanwhile, shares of app maker Snap were 16% lower afer the company declined to give guidance due to economic uncertainty. It also said some advertisers have reported an impact from changes to the de minimis exemption that is scheduled to end May 2.
- Medora Lee and Andrea Riquier
The nation's gross domestic product, the value of all goods and services produced in the U.S., shrank at a seasonally adjusted annual rate of 0.3% in the January-to-March period, the Commerce Department said Wednesday. That