US economy was already sputtering before trade pain kicked in

Vince Golle

Updated Sat, Apr 26, 2025, 3:52 PM 8 min read

(Bloomberg) — After cruising along comfortably for most of last year, the world’s largest economy lost altitude at the start of 2025 as consumers tired and the trade deficit ballooned on a tariff-related scramble for imports.

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The US government’s initial estimate of first-quarter gross domestic product is projected to show the economy expanded at a 0.4% annualized rate, the weakest in nearly three years. With financial markets hypersensitive to the economy’s prospects, near-stagnant GDP would risk elevating concerns about a potential recession and any unraveling of the job market.

So far, though, the hiring pace has cooled just a bit, and there are no signs of widespread layoffs. On Friday, the closely watched monthly employment report is forecast to show a 130,000 increase in payrolls — about 100,000 less than the larger-than-expected March gain. The jobless rate is projected to hold at 4.2%.

GDP data on Wednesday will be an appraisal of the economy in the early period of Donald Trump’s presidency, showing the initial impact of his tariffs and trade-policy messaging in the lead-up to more sweeping duties that were announced April 2.

Business investment in equipment — largely, commercial aircraft — may be a bright spot in the GDP report. However, companies have since become increasingly guarded about spending as they await more clarity on tariffs, trade deals and tax policy.

“We estimate real GDP decelerated sharply in the first quarter to 0.4%, from 2.4% in the final quarter of 2024. The trade deficit is set to be the largest drag, as businesses front-loaded goods imports ahead of the Trump administration’s tariff surge. Consumers also rushed to buy goods that are likely to face higher prices from the tariffs, such as cars, though they otherwise remained cautious.”

—Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou and Chris G. Collins, economists.

The latest Bloomberg monthly survey of economists shows GDP will expand by less than 1% in each of first three quarters of this year, with private investment retrenching. Consumers, many of whom have grown concerned about job security, are also seen limiting their purchases.

Another key report in the coming week is a monthly reading on personal consumption and income at the end of the first quarter. Economists forecast a healthy increase in March spending along with cooler income growth. Wednesday’s report is also seen showing a welcome slowdown in the Federal Reserve’s preferred inflation gauge.