US economy shrank 0.5% in Q1 on import surge ahead of tariffs

The US economy contracted more than previously estimated in the first three months this year, according to government data released Thursday, with consumer spending and exports weaker than expected. US GDP decreased at an annual rate of 0.5 percent in the first quarter, according to the Department of Commerce, down from an earlier estimate of a 0.2 percent decline.

The US economy shrank more than initially projected in the first quarter of the year, as per updated government figures released on Thursday.

The revised data from the Commerce Department shows the Gross Domestic Product (GDP) fell at an annual rate of 0.5 percent, a steeper drop than the previously estimated 0.2 percent decline. The downward revision reflects softer-than-expected consumer spending and weaker export performance.

The data came after an import surge that was triggered by US President Donald Trump's sweeping tariffs since returning to the White House this year.

Businesses had stockpiled goods to try and get ahead of Trump's levies targeting most trading partners -- especially products from China.

Imports are a subtraction in the calculation of GDP, and the overall decrease in the first three months this year reflected this uptick, alongside a drop in government spending.

The movements were partially offset by advances in consumption and investment.

But the change in estimates on Thursday mainly reflected "downward revisions to consumer spending and exports," said the Commerce Department.

This was partly offset by a downward revision to imports, the department added.

In April, Trump imposed a 10 percent tariff on imports from almost all US trading partners and unveiled higher duties on dozens of economies before pausing their implementation while trade negotiations are ongoing.

But a July deadline for their implementation is approaching, adding to uncertainty in the world's biggest economy.

Trump has also slapped steep levies on imports of steel, aluminum and autos.

The president's changes in tariff policy have roiled financial markets, snarled supply chains and dragged on consumer sentiment.

Economists warn the duties could fuel inflation and weigh on economic growth, although they have so far not caused widespread price increases in the country.

For now, policymakers are closely monitoring economic data over the summer for the broader effects of trade policies.

*With Agency Inputs