Hit by Trump trade wars, U.S. economy falls 0.2% in first quarter, an upgrade from initial estimate

WASHINGTON (AP) — The U.S. economy shrank at a 0.2% annual pace from January through March, the first drop in three years, as President 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 massive import 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.

And federal government spending fell at a 4.6% annual pace, the biggest drop in three years.

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.

From January through March, business investment surged 24.4%. An increase in inventories — as businesses stocked up ahead of the tariffs — added more than 2.6 percentage points to first-quarter GDP growth.

A category within the GDP data that measures the economy’s underlying strength rose at a 2.5% annual rate from January through March, down from 2.9% in the fourth quarter of 2024 but still solid. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.

Trump's tariffs have added considerable uncertainty to the economic outlook. He has imposed 10% tariffs on almost every country on earth in addition to levies on steel, aluminum and autos. A federal court on Wednesday blocked the 10% tariffs as well as specific taxes on Canadian, Mexican and Chinese imports, saying the president had overstepped his authority.

Thursday’s report was the second of three Commerce Department estimates of first-quarter GDP. The final version arrives June 26.

FILE - People pack their supplies into their vehicles at Costco Wholesale store in Burbank, Calif., on Thursday, April 10, 2025. (AP Photo/Damian Dovarganes, File)

FILE - The per-gallon price is illuminated on the pump at a Costco warehouse gasoline station Tuesday, April 1, 2025, in Thornton, Colo. (AP Photo/David Zalubowski, File)

WEST PALM BEACH, Fla. (AP) — President Donald Trump on Sunday fired off another warning to the government of Cuba as the close ally of Venezuela braces for potential widespread unrest after Nicolás Maduro was deposed as Venezuela's leader.

Cuba, a major beneficiary of Venezuelan oil, has now been cut off from those shipments as U.S. forces continue to seize tankers in an effort to control the production, refining and global distribution of the country's oil products.

Trump said on social media that Cuba long lived off Venezuelan oil and money and had offered security in return, “BUT NOT ANYMORE!”

“THERE WILL BE NO MORE OIL OR MONEY GOING TO CUBA - ZERO!” Trump said in the post as he spent the weekend at his home in southern Florida. “I strongly suggest they make a deal, BEFORE IT IS TOO LATE.” He did not explain what kind of deal.

The Cuban government said 32 of its military personnel were killed during the American operation last weekend that captured Maduro. The personnel from Cuba’s two main security agencies were in Caracas, the Venezuelan capital, as part of an agreement between Cuba and Venezuela.

“Venezuela doesn’t need protection anymore from the thugs and extortionists who held them hostage for so many years,” Trump said Sunday. “Venezuela now has the United States of America, the most powerful military in the World (by far!), to protect them, and protect them we will.”

Trump also responded to another account’s social media post predicting that his secretary of state, Marco Rubio, will be president of Cuba: “Sounds good to me!” Trump said.

Trump and top administration officials have taken an increasingly aggressive tone toward Cuba, which had been kept economically afloat by Venezuela. Long before Maduro's capture, severe blackouts were sidelining life in Cuba, where people endured long lines at gas stations and supermarkets amid the island’s worst economic crisis in decades.

Trump has said previously that the Cuban economy, battered by years of a U.S. embargo, would slide further with the ouster of Maduro.

“It’s going down,” Trump said of Cuba. “It’s going down for the count.”

A person watches the oil tanker Ocean Mariner, Monrovia, arrive to the bay in Havana, Cuba, Friday, Jan. 9, 2026. (AP Photo/Ramon Espinosa)

President Donald Trump attends a meeting with oil executives in the East Room of the White House, Friday, Jan. 9, 2026, in Washington. (AP Photo/Alex Brandon)