WASHINGTON — Data released Friday by the Commerce Department showed that consumers reduced their spending in January by the most since February 2021, even as their incomes rose.

Americans cut their spending by 0.2% in January from the previous month, likely in part because of unseasonably cold weather. Yet the retreat may be hinting at more caution by consumers amid rising economic uncertainty.

On a positive note, inflation cooled, but President Donald Trump’s threats to impose large import taxes on Canada, Mexico and China — the United States’ top trading partners — will likely push prices higher, economists say. Some companies are already planning to raise prices in response.

“The roller coaster of news headlines emanating from Washington D.C. is likely going to push businesses to the sidelines for a time and even appears to be impacting consumers,” said Stephen Stanley, chief U.S. economist at Santander, in an email.

The reduction in consumer spending — coupled with a surge of imports in January, also reported Friday, as companies likely sought to front-run tariffs — led the Federal Reserve’s Atlanta branch to project that the economy would shrink 1.5% at an annual rate in the January-March quarter, a sharp slowdown from the 2.3% growth in the final three months of last year.

Most analysts still expect the economy to expand in the first quarter, but at a much slower pace. Stanley lowered his estimate for first-quarter growth from about 2.25% to just 1.25%.

Inflation declined to 2.5% in January compared with a year earlier, down from 2.6% in December, the Commerce Department said Friday. Excluding the volatile food and energy categories, core prices dropped from 2.9% to 2.6%, the lowest since June.

Economists noted inflation would likely keep cooling, but the progress could be upended by tariffs. Trump said Thursday he would impose 25% duties on imports from Canada and Mexico, though just 10% on oil from Canada. He also said he wanted to double the current tariff on imports from China to 20%.

Trump is also calling for widespread firings of federal workers, which could cause hundreds of thousands of job losses and potentially lift the unemployment rate.

Randy Carr, chief executive officer of World Emblem, said the tariffs, if imposed, will force him to raise prices and cut jobs. World Emblem makes patches, labels and badges for companies, universities and law enforcement agencies.

The firm has factories in Georgia and California but it makes about 60% of its products in Mexico. Carr said if the 25% import taxes are imposed, he expects to raise prices by 5% to 10%. He also plans to cut “a handful” of jobs among the 500 workers his company has in the United States to help absorb the rest of the costs.

Carr said he would also cancel about $9 million in planned investments in artificial intelligence and online commerce.

“It’s so annoying,” he said. “Right now you have this volatility, and so you really can’t plan anything. You just got to wait until we get a final verdict from from the administration. It’s definitely not punishing Mexico, it’s punishing us.”

The inflation-fighters at the Federal Reserve said in January they planned to keep their key short-term interest rate on hold, at 4.3%, to slow borrowing and spending enough to lower inflation back to their 2% target. The Fed’s elevated rate has contributed to higher borrowing costs for mortgages, auto loans and credit cards.

The Fed prefers Friday’s inflation measure to the more widely known consumer price index, which rose for the fourth straight month in January to 3%. Friday’s gauge calculates inflation slightly differently: For example, it puts less weight on the costs of housing and used cars.

Inflation spiked in 2022 to its highest level in four decades, propelling Trump to the White House and leading the Fed to rapidly raise interest rates to tame prices. It has since fallen from a peak of 7.2%, and some economists expect it could fall closer to 2% in the coming months, absent tariffs.

“The inflation data could be distorted higher at exactly the time when the Fed would otherwise be in a position to declare a win,” Stanley said.

One other bright spot in the report was that incomes jumped 0.9% in January from December, fueled in part by a large annual cost of living adjustment for Social Security beneficiaries.

Yet Americans spent less anyway — particularly on cars, where purchases fell sharply. Some consumers could be trying to save money after splurging during the Christmas shopping season. Credit card debt surged in December, economists noted.

A big concern right now is whether tariffs will push up inflation, slow the economy, or — in a particularly toxic combination — both.

The chief executive officer of Walmart Inc. said American consumers are showing signs of stress as food prices remain stubbornly high.

Some shoppers are running out of money before the end of the month and turning to smaller pack sizes for consumer goods, Chief Executive Officer Doug McMillon told about 1,000 executives at the Economic Club of Chicago on Thursday evening. While prices for products such as apparel are now near pre-pandemic levels, food prices are still elevated.

Bentonville-based Walmart is seeing “stress behaviors” among budget-conscious consumers, “and we worry about that,” McMillon said. “You can see that the money runs out before the month is gone, you can see that people are buying smaller pack sizes at the end of the month.”

He also noted that overall consumer behavior has remained consistent over the past year or so. Shoppers are being more selective and prioritizing value purchases.

Higher prices for everything from beef and eggs to fuel present a challenge for retailers including Walmart, which has become one of the world’s largest companies by offering “everyday low prices.” The company recently projected lower-than-expected profit for the current fiscal year while citing uncertainty related to consumer behavior as well as economic and geopolitical conditions.

“There are lots of income levels in this country — if you’re at the lower end of that scale, you are feeling more frustration and pain because of higher food prices,” McMillon said. “They’ve persisted for years now, and you’re just tired of it. And you want it to get better.”

Last year, Dollar General Inc. also warned that inflation was having a negative impact on lower-income shoppers, with a growing number unable to make their incomes cover their monthly expenses.

Information for this article was contributed by Christopher Rugaber, Anne D’Innocenzio and Josh Boak of The Associated Press and Jaewon Kang of Bloomberg News.