The U.S. economy shrank by 0.3% in the first quarter of the year, as companies stockpiled imported goods in response to a series of tariffs announced by President Donald Trump.
Aside from the surge in imports, expected ahead of the tariffs, the economy benefited from business and consumer spending for a solid showing in the first quarter, USA TODAY reported. Still, the extent of the imports surprised many analysts.
Closer look: Stocks tumble following GDP report.
Imports of foreign goods and services detract from the country's gross domestic product - more imports cause a greater decline.
The Q1 drop was the largest since a 1% loss in Q1 2022, a decline caused in part by supply chain problems during the pandemic.
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Economists had expected the economy to grow by 0.4%, according to the Wall Street Journal.
Gross domestic product is the value of all goods and services produced in the U.S. It serves as an indicator of the country's economic health.
The tariffs have injected notes of uncertainty into business operations and consumer buying habits. Businesses are finding it difficult to plan with the possibilities of rising costs and supply chain disruptions.
Consumer spending was recorded at 1.8% in the first quarter, down from a 4% increase in Q4 2024, the report said.
Tariffs are expected to substantially deepen the drop-off by sapping consumers' buying power. Higher-income Americans are likely to reduce their spending following the trade war-induced stock market sell-off, according to Moody's Analytics.
In April, consumer confidence fell to the lowest level since May 2020, the Conference Board said this week. Growing concerns over tariffs affected the economic outlook, Reuters reported.
CONTRIBUTING Paul Davidson, USA TODAY
SOURCE USA TODAY Network reporting and research; Reuters; Bureau of Economic Analysis