Tariffs Prompt Pre-Stockpiling, Likely Slowing U.S. Economy First Quarter Growth

By Lucia Mutikani

WASHINGTON (Romero.my.id) – The U.S. economy may have stagnated or possibly shrunk during the initial quarter due to an influx of imports as companies tried to dodge rising expenses, highlighting the disruptive impact of President Donald Trump’s frequently tumultuous tariff policies.

The preliminary GDP report from the Commerce Department released on Wednesday may significantly misrepresent the weakening state of the economy. Coming as it does at the end of President Trump’s first 100 days in office, this data could amplify American voters’ increasing dissatisfaction with how he has managed economic matters up until now. Last November, Trump secured victory largely due to public unease about the economy, particularly concerns related to inflation.

Customer trust is close to reaching its lowest point in half a decade, and corporate optimism has plummeted as well. Meanwhile, airlines have withdrawn their 2025 economic projections, pointing out the ambiguity surrounding expenditures on leisure trips due to duties imposed. Economists caution that these levies could inflate expenses for both businesses and families.

Joe Brusuelas, the chief economist at RSM US, stated, “The trade shock stands out prominently, dwarfing all other efforts made by the White House.” He further noted, “Given that we’ve transitioned from a trade shock to a financial shock with potential implications for an economic downturn within just under 100 days, this should serve as a warning against proceeding further along this path of imposing tariffs.”

According to a Romero.my.id survey of economists, the GDP is expected to have grown at an annualized rate of 0.3% in the previous quarter, marking the most sluggish growth since the second quarter of 2022. However, this prediction was made prior to Tuesday’s data revealing that the goods trade deficit reached an unprecedented level in March due to record-high imports. This new information led economists to significantly reduce their GDP forecasts.

According to economists' estimates, the trade deficit may have reduced GDP growth by up to 1.9 percentage points in the previous quarter. Goldman Sachs predicts that GDP declined at an annualized pace of 0.8%. In comparison, the economy expanded at a rate of 2.4% during the final quarter.

Several economists cautioned against giving too much importance to the GDP figure, suggesting that a significant portion of the increase in imports could be attributed to an unusually high volume of non-cash gold transactions.

Amidst the ambiguity surrounding the predictions, the Atlanta Federal Reserve’s model forecasts GDP declining at a rate of 1.5% following adjustments for gold imports and exports. However, the New York Fed’s team projects GDP growing at a rate of 2.6%.

Some contended that the information failed to alter the storyline of an ailing economy attributed to tariff-induced uncertainties.

"Expecting this report, there aren’t really any genuine positive aspects to highlight,” stated Matt Colyar, an economist at Moody’s Analytics. “Given how haphazardly these policies have been introduced—everyone learns about them immediately—they’re correctly assessing that prices for their purchases will rise significantly.”

HIGHER INFLATION

It’s anticipated that prices rose during the previous quarter and will keep increasing throughout this year. The Personal Consumption Expenditures price index, which excludes the fluctuating costs of food and energy, is projected to rise at a rate of about 3.3%, marking an uptick from the 2.6% growth observed between October and December.

Economists anticipate that the Federal Reserve will start lowering interest rates again at some stage later this year.

On Tuesday, Trump mitigated the impact of his automobile tariffs via an executive order that included both credits and reductions in certain other taxes on components and raw materials. The 145% tariff on products from China—which triggered a trade conflict between Washington and Beijing—continues unchanged, along with various additional import charges.

Personal consumption, making up over sixty percent of economic activity, is anticipated to have decelerated markedly. Many families advanced their purchases earlier this year to dodge rising costs. Additionally, with the job market becoming less robust, individuals are primarily opting to save money instead.

Even though there has been an increase in imports, the buildup of inventories remains relatively restrained. This supports analysts’ view that the GDP figure ought to be viewed cautiously since the larger trade deficit can largely be attributed to increased gold imports.

A few suggested that investors should concentrate on final sales to private domestic buyers—excluding trade, inventory levels, and governmental expenditures—to gain a clearer understanding of economic health.

Others, nonetheless, viewed this conventional gauge of internal demand as being skewed by import duties.

"However, consumption spending was clearly inflated due to tariff-frontrunning, so the growth in spending is likely to overstate the growth in domestic output," said Lou Crandall, chief economist at Wrightson ICAP. "The potential measurement slippages in the inventory and net export numbers will make it hard to say exactly how large that overstatement might be."

(Reported by Lucia Mutikani; Edited by Andrea Ricci)