US economy shrank in first quarter

Underlying economic growth stayed solid

- BEN CASSELMAN

The chaotic start to President Donald Trump's second term roiled the economy at the beginning of the year, as consumers and businesses scrambled to react to a constant stream of tariff announcements and policy shifts.

The policies, and the uncertainty they created, were enough to push economic growth into reverse in the first quarter. US gross domestic product, adjusted for inflation, declined at a 0.3% annual rate in the first three months of the year, the Commerce Department said Wednesday, a stunning reversal from the strong growth at the end of last year.

The first quarter decline was largely the result of quirks in the way economic activity is measured. More reliable data on consumer spending and business investment suggested that growth slowed in the first quarter but didn't contract.

But while the negative number was misleading, it reflected something real about the way Trump has upended the economy in his first months in office. Consumers raced to buy cars and other goods before tariffs took effect. Businesses did the same with equipment, parts and raw materials, laying in stores for the trade war to come.

Moreover, the first quarter figures were a glimpse at the past, before Trump announced even more sweeping tariffs in early April. That announcement, and the series of escalations and reversals that followed, caused chaos in financial markets and set off a full-blown trade war with China.

Stocks fell at the start of trading Wednesday, as Wall Street remained fixated on the effects of Trump's trade policies. The S&P 500 fell about 2% in early trading.