The Big Story 

Gross domestic product (GDP) shrank during the first quarter of 2025 as a surge of imports ahead of President Trump’s tariffs took a bite out of economic growth calculations.

© Greg Nash

U.S. GDP fell at an annualized rate of 0.3 percent during the first three months of the year, according to data released Wednesday by the Commerce Department, after an annualized increase of 2.4 percent in the fourth quarter of 2024.

Economists had expected U.S. GDP to fall amid a steep increase in orders of foreign products, which could be far more expensive once Trump’s full slate of tariffs take effect.

“The drop seems to be wholly due to tariff-related distortions,” economists at Pantheon Macroeconomics wrote in a Tuesday preview of the report.

“GDP likely would have risen in the absence of the dramatic shift in policy. Underlying momentum in growth was undoubtedly waning before the tariff shock, though, and in its aftermath we now expect activity to stagnate this year.”

The first-quarter import surge took roughly 5 percentage points off of the GDP growth rate, according to the Commerce Department, washing out nearly 4 percentage points from domestic investment and roughly 1 percentage point from consumer spending.

The Hill’s Sylvan Lane has more here.

Welcome to The Hill’s Business & Economy newsletter, I’m Aris Folley — covering the intersection of Wall Street and Pennsylvania Avenue.

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Tax Watch 

Welcome a new newsletter feature focused on the fight over tax reform and the push to extend the 2017 Trump tax cuts this year.

Republicans meet to hash out SALT

Republicans were scheduled to meet Wednesday afternoon about the state and local tax (SALT) deduction cap, one of the thorniest issues facing the party as they work to extend the 2017 tax cuts.

The 2017 cuts capped the deduction at $10,000, alienating Republicans in higher-tax blue states where the deduction was popular among wealthier taxpayers.

Members of the Congressional SALT caucus seeking to raise the cap have floated various numbers, including $20,000, $30,000 and $60,000. President Trump pledged to “get SALT back” while on the campaign trail last year.

“[SALT caucus member] Mike Lawler (R-N.Y.) has advocated for a cap closer to $60,000, but we expect the compromise proposal to come in much lower given the cost of a higher cap and its potential to squeeze out other tax priorities that need to fit into the bill,” political consultants Beacon Policy Advisors wrote in a Tuesday brief.

— Tobias Burns

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