Separate data out Wednesday showed that inflation-adjusted consumer spending climbed 0.7 percent last month—more than analysts expected—after an upward revision to the prior month. Meanwhile, the Federal Reserve’s preferred inflation gauge was unchanged in March, the tamest in almost five years, excluding food and energy.

Trump trade adviser Peter Navarro called the GDP report “the best negative print I have ever seen in my life” in an interview Wednesday with CNBC, saying consumption remained strong and the president’s deregulation efforts would buoy the economy.

The GDP figures showed imports surged an annualized 41.3 percent—the biggest advance in nearly five years. Because these goods and services aren’t produced in the United States, they are subtracted from GDP. Many economists expect the sharp widening of the trade deficit to reverse in the second quarter, which would support a near-term rebound in growth.

However, looking further out, forecasters contend that the higher duties will cause a supply shock, challenging businesses and leading to a pullback in demand. Retaliatory tariffs would also discourage exports, setting up a tough backdrop for the rest of the year and making the odds of a recession essentially a coin flip.

“If the blowout on trade was the result of firms pre-buying imported inputs to beat the tariffs, the decay in the trade balance will reverse in Q2. That will generate some GDP growth,” Carl Weinberg, chief economist at High Frequency Economics, said in a note. “However, corrosive uncertainty and higher taxes—tariffs are a tax on imports—will drag GDP growth back into the red by the end of this year.”

In a social media post, Trump said the U.S. economy will “take a while” to show results of the current policies and blamed the stock market’s performance on his predecessor, Joe Biden.

Typically, imported merchandise moves into warehouses or directly to storefronts. However, the report showed business inventories contributed 2.25 percentage points to GDP during the quarter, the most since the end of 2021. The recent flood of imports may instead show up in higher inventories in coming months, which could also provide a lift to second-quarter GDP. Because swings in trade and inventories can sometimes distort overall GDP, economists prefer looking at final sales to private domestic purchasers for a better snapshot of demand. This measure increased at a 3 percent pace in the first quarter, after rising an annualized 2.9 percent at the end of 2024.

Growth in consumer spending was driven by a broad-based advance in outlays for services and a pickup in nondurable goods. Several surveys indicate that consumer attitudes have plunged, raising doubts about the ability of households to provide much fuel for the economy. Low-income consumers are already facing hardships of high prices, while wealthier individuals have been set back by this year’s drop in stock prices.

Meanwhile, business investment in equipment advanced at a 22.5 percent annualized rate. In addition to a surge in commercial aircraft shipments months after the end of a strike at Boeing Co., output of information processing equipment and computers also jumped.

Economists also see tariffs weighing on capital expenditures, and corporations have acknowledged during the current earnings season that the road ahead for consumers will be challenging. Retailer Tractor Supply Co. and appliance-maker Whirlpool Corp. are among companies noting that discretionary spending and sales of big-ticket goods have softened more recently. During earnings calls, many executives mentioned the collapse in consumer confidence and the potential for a more guarded approach to spending.

“It’s difficult to imagine a more tumultuous market backdrop than we’ve experienced over the last couple of months,” Richard Westenberger, CFO and COO at baby-apparel maker Carter’s Inc., said on that company’s April 25 earnings call.

The GDP report also showed government spending declined at a 1.4 percent pace, the first decrease since 2022 and restrained by an 8 percent drop in defense outlays. Trump temporarily paused military aid for Ukraine last month. Meanwhile, a closely watched measure of underlying inflation—the core personal consumption expenditures (PCE) price index—accelerated to a 3.5 percent pace in the first quarter, the most in a year.

The uncertainty over the effect of tariffs on inflation as well as the broader economy has put the Federal Reserve in a tough position. Policymakers have indicated they’re in no rush to lower interest rates until they get further clarity on what the White House policies mean for the economy.

While the Trump administration has implemented a 90-day pause on some of the more punitive tariffs announced earlier this month, the country’s effective tariff rate now stands at almost 23 percent—the highest in more than a century—according to Bloomberg Economics. Adding to the uncertainty are some exemptions from previously announced duty increases. The president and his economic advisers see tariffs as a means to stoke economic growth over the longer term through the revival of manufacturing. Trump also hopes to drive export growth and erase deficits with U.S. trading partners, raise revenue for the government, and bolster national security.

The government’s monthly jobs report due Friday is projected to show some cooling is underway. A report out Wednesday showed employment at private companies rose a disappointing 62,000 in April, the smallest gain since July, according to ADP Research.

A separate report showed labor costs rose 0.9 percent in the first quarter, matching the gain at the end of 2024.

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