The US economy registered a modest contraction in the first quarter, as tariff uncertainty and mounting trepidation across corporate America test the resilience of the world’s largest economy. GDP shrank at an annualized rate of 0.3% in the three months through March, driven by a surge in imports leading up to the tariff rollout, according to the Commerce Department’s initial estimate on Wednesday. The economy grew at a 2.4% pace in the fourth quarter. A downshift in the US economy has stoked recession fears, given the risk that tariffs could elevate inflation and challenge both business and household balance sheets. The monthly jobs report on Friday is forecast to show that hiring cooled in April. Economists anticipate a gain of 133,000 jobs versus 228,000 during the prior month—enough to keep the unemployment rate at 4.2%.

Corporate earnings from Silicon Valley and other industries provided another bellwether for how the trade war could impact businesses and economic activity overall. With the tariff endgame still to be determined, some companies have dimmed their outlook for profits and sales—or erased guidance altogether—as they brace for higher costs and potential disruptions to their supply chains. However, first-quarter earnings for members of the S&P 500 are on track to rise 10.1% year-over-year, based on a FactSet analysis of reported and projected results last Friday. As PGIM Fixed Income notes in the latest edition of Weekly View from the Desk, the start of the third quarter is shaping up as a future milestone for the economy, as tariff effects and negotiations over tax and spending plans come into better view.