The U.S. economy shrank at a 0.3% annual pace from January through March, first drop in three years. It was slowed by a surge in imports as companies in the United States tried to bring in foreign goods before President Donald Trump imposed massive tariffs.

The January-March expansion in gross domestic product — the nation's output of goods and services — was down from 2.4% in the last three months of 2024. Imports shaved 5 percentage points off first-quarter growth. Consumer spending also slowed sharply. Federal government spending plunged 5.1%.

But business investment rose at a 21.9% clip as companies poured money into equipment. And a category within the GDP data that measures the economy’s underlying strength rose at a healthy 3% annual rate from January through March, up from 2.9% in the fourth quarter of 2024. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.

Trump inherited a solid economy that had grown steadily despite high interest rates imposed by the Federal Reserve to fight inflation. His erratic trade policies — including 145% tariffs on China — have paralyzed businesses and threatened to raise prices and hurt consumers.