WASHINGTON (AP) — The U.S. economy shrank at a 0.2% annual pace from January through March, the first drop in three years, asPresident Donald Trump's trade wars disrupted business, the government said Thursday in a slight upgrade of its initial estimate. First-quarter growth was brought down by a surge in imports as companies in the United States hurried to bring in foreign goods before the president imposed massiveimport taxes. The January-March drop in gross domestic product — the nation's output of goods and services — reversed a 2.4% gain in the fourth quarter of 2024. Imports grew at a 42.6% pace, fastest since third-quarter 2020, and shaved more than 5 percentage points off GDP growth. Consumer spending also slowed sharply. Trade deficits reduce GDP. But that's mainly a matter of mathematics. GDP is supposed to count only what's produced domestically. So imports — which the government counts as consumer spending in the GDP report when you buy, say, Costa Rican coffee — have to be subtracted out to keep them from artificially inflating domestic production. The first-quarter import surge likely won't be repeated in the April-June quarter and therefore shouldn't weigh on GDP. Thursday's report was the second of three Commerce Department estimates of first-quarter GDP. The final version comes out June 26.
