Key Takeaways US GDP growth is expected to slow sharply in the first quarter from 2.4% growth in the fourth quarter, reflecting a surge in imports ahead of new tariffs. Analysts expect the economy to grow more slowly in 2025 and 2026 as consumers and businesses adjust to the tariffs. A major growth slowdown could tip the US economy into recession.
Even before President Donald Trump unleashed his full tariff onslaught, the US economy was feeling the effects of protectionist trade policies. Economists’ forecasts for growth in the first quarter of 2025 predict a significant slowdown, including the potential for an outright decline, likely driven by a surge in imports as US firms stocked up on inventory to get ahead of the levies. FactSet’s consensus estimates show that economists expect 0.8% growth, down from 2.4% growth in the fourth quarter of 2024.
A widely watched model from the Federal Reserve Bank of Atlanta, recently adjusted to account for unusual gold import numbers, is now pointing to negative 0.4% growth for the first quarter. Economists from Goldman Sachs expect negative 0.2% growth, while Bank of America economists expect 0.4% growth. “There’s a high likelihood of a contraction in the first quarter,” says Bill Adams, chief economist for Comerica Bank, who is expecting negative 1.4% growth.
Wednesday’s data will come amid mounting concerns about a recession in the United States, and some forecasts are even calling for a decline in GDP. Trump’s tariffs have set off alarm bells throughout global markets. Analysts agree they will likely dent growth and stoke inflation, at least in the short term.
While GDP data for the first quarter is likely to be skewed by firms and consumers frontrunning tariffs, analysts expect a more pronounced slowdown in growth later this year as the tariffs are implemented and consumers and businesses adjust. They say growth on par with what the US saw in 2024 is not likely this year. Q1 GDP Report Highlights GDP report release date and time: Wednesday, April 30, at 8:30 a.m. EST First-quarter GDP is expected to rise 0.8% in the first quarter, compared with a 2.4% increase in the fourth quarter of 2024, according to FactSet’s consensus estimates.
Forecasts Show Imports Weighing on GDP Gross domestic product is a measure of all the goods and services produced by an economy. It includes consumer activity, business investment, government spending, and the trade balance (exports minus imports). Economists say that while the majority of that equation likely pointed to a growing economy in the first quarter, a massive uptick in imports will weigh on the final calculation.
“The big headwind to the economy in the first quarter is that there was a surge in imports, meaning that more spending by businesses was directed towards bringing goods into the country to avoid tariffs rather than spending on domestically produced goods and services,” Adams explains. Greg Daco, chief economist at EY, expects some of the drag on GDP from imports to be offset by inventory growth—another sign that businesses were stocking up earlier this year to get ahead of tariffs. “You’re going to see more accumulation, faster accumulation, of inventories in the first quarter,” he says.
On Watch For GDP Slowdown Though dramatic, the surge in imports and inventories will likely be temporary. Economists expect that when businesses and consumers are no longer frontrunning the new taxes, economic growth should slow more steadily. Daco says he’ll be watching for a significant moderation in spending and imports for the rest of the year.
“The car that’s bought today won’t be bought tomorrow,” he explains. While consumers and businesses pulled forward their purchases over the last few months, they’re likely to slow them down in the months ahead, especially for bigger-ticket discretionary items. “You see stronger growth initially, but after that, the risk is a demand cliff,” he says.
“The stronger the pull-forward of demand, the worse the demand cliff will be.” Daco expects 1.1% growth in 2025 and 2026, while Adams is anticipating 1.2% growth. That slowdown is likely to extend to the global economy. Last week, the IMF released new projections for global growth in 2025 and 2026, reducing its global forecast for this year to 2.8% from 3.3% in 2024.
It expects 1.8% GDO growth for the United States in 2025. “Intensifying downside risks dominate the outlook, amid escalating trade tensions and financial market adjustments,” the organization wrote. Recession Odds Climb The Trump administration’s latest round of tariffs was announced on April 2, just after the end of the first quarter.
Some of those tariffs have already been paused or modified, muddying the outlook for the rest of the year and beyond. “The rearview mirror is of very little help to understand what the rest of the year holds,” Daco says. He puts the odds of a recession at about 45%, assuming some tariffs on China are ultimately rolled back.
Adams sees a 40% chance of a recession and says that while a single quarter of negative growth in line with his forecast would not be cause for major concern, he and other economists are more concerned about the outlook in the months ahead. He’s especially concerned by a sharp deterioration of consumer sentiment. “The US economy is pointed in a dangerous direction, and the further we go down this trajectory, the higher the likelihood of recession,” he says.
