Under the threat of tariffs, the U.S. goods trade deficit hits a record high! The GDP in the first quarter is highly likely to suffer a severe blow

According to the Zhitong Finance APP, the U.S. goods trade deficit unexpectedly widened to a record high in March, as companies continued to import goods ahead of the tariff implementation. This suggests that the U.S. economic output data for the first quarter may face significant drag, with the surge in monthly imports possibly being the last effort by U.S. companies to secure supplies of goods and materials before the tariffs take effect. Recent forecasts indicate that the trend of U.S. economic weakness is difficult to avoid, with many economists significantly lowering their GDP growth expectations for the U.S. in 2025, and some even predicting that the U.S. economy will fall into recession in 2025.

Data released by the U.S. Department of Commerce on Tuesday showed that the U.S. goods trade deficit unexpectedly increased by 9.6% month-on-month in March, reaching $162 billion. Since imports are counted as a negative in the calculation of U.S. Gross Domestic Product (GDP), this data suggests that the initial GDP estimate for the first quarter, which will be released by the U.S. government on Wednesday Eastern Time, will be weaker than economists' previous general expectations and may even fall into negative growth. This has already prompted several economists to lower their forecasts for first-quarter U.S. GDP and 2025 U.S. GDP estimates following the record deficit data release.

Another report released on the same day showed that the tariff policies of the Trump administration have also significantly worsened the outlook of U.S. businesses and ordinary households regarding the economic prospects and financial conditions. Statistics released by the Conference Board indicated that in April, U.S. consumers' expectations index for the next six months fell to the lowest level since 2011.

U.S. Goods Trade Deficit Expands to Record High—U.S. Companies Rush to Import to Avoid Tariffs

The latest trade data shows that the surge in imports reflects U.S. companies' last-minute stockpiling before President Donald Trump announced the implementation of tariffs on steel and aluminum in March and a broader global tariff policy in early April.

The median of a Bloomberg survey of economists indicates that some economists quickly lowered their GDP growth expectations after the trade deficit data was released. Economists currently generally expect the annualized U.S. GDP growth rate for the first quarter to achieve a quarter-on-quarter increase of 0.3%, which is expected to be the slowest growth rate since early 2022. However, some economists expect the U.S. economy to contract, with the latest core forecast from the Atlanta Fed's GDPNow economic model showing a 1.5% decline in U.S. GDP in the first quarter.

"This leading trade data supports our pessimistic expectation of a 1.1% contraction in U.S. GDP," wrote Carl Weinberg, chief economist at High Frequency Economics, in a report. "The risks to GDP are even skewed further downward."

Stephen Stanley, chief economist at Santander's U.S. Capital Markets, is even more pessimistic. Based on trade statistics, he has lowered his forecast by one percentage point, expecting a contraction of about 2.4% in U.S. GDP for the first quarter However, he stated that if U.S. imports return to normal in the second quarter, GDP growth "should achieve a strong rebound."

Tariff Storm Sweeps Across the U.S., Is the U.S. Economy in Danger by 2025?

The tariff policy can be said to be the core of Trump's push to revive domestic manufacturing in the U.S., promote and expand export growth, reduce the trade deficit with partners, increase fiscal revenue, and strengthen national security strategy.

The March U.S. trade data report shows that under the impetus of U.S. merchants and consumers actively seizing imported goods before the implementation of Trump's tariff policy in April, imports rarely increased by 5% to $342.7 billion, with consumer goods surging to a record high; imports of automobiles and capital goods also exceeded expectations. Exports grew by 1.2%.

Data shows that imports of industrial-type goods decreased, including metals, oil, timber, and other production materials, as well as gold bars for investment purposes.

However, the latest data does not clarify whether gold bars significantly impacted import figures; a large part of the trade deficit expansion earlier this year was attributed to large-scale imports of gold bars. Economists will pay closer attention to the broader trade data released on May 6 to understand changes in gold bar imports. Gold bars are classified as "finished metal shapes."

It is worth noting that gold for investment purposes is not included in the U.S. government's GDP statistical options. Even excluding gold, the Atlanta Fed's GDPNow forecast still indicates that trade data will lower GDP by more than 4 percentage points, consistent with the phenomenon of businesses stockpiling other goods and raw materials before the implementation of the tariff policy.

The U.S. Department of Commerce report also shows that wholesale inventory data increased for the second consecutive month by 0.5%; retail inventory decreased by 0.1% last month, with a reduction in automobile dealer inventory.

Data from the U.S. Bureau of Labor Statistics shows that U.S. job vacancies in March fell to the lowest level since September of last year, reflecting a weakening labor demand amid increasing uncertainty in the U.S. economy. However, the data also shows that the overall U.S. labor market remains robust: the number of layoffs fell to the lowest level since June of last year, and hiring activity remained stable.

The Trump administration decided to impose astonishing tariffs of up to 145% on China (one of the top three trading partners of the U.S.) and at least 10% tariffs on most other countries, prompting many forecasters to warn that the global economy will sharply slow down in the future, with some even predicting a deep economic recession in the U.S. this year. This is partly due to the significant downward pressure on household demand in the U.S., which has been facing inflationary pressures since the high inflation period of 2022, with some households' savings being quite limited, and household demand or consumption accounting for about two-thirds of U.S. GDP.

Although the Trump administration earlier this month implemented a 90-day grace period for some of the most severe "reciprocal tariffs," during which the benchmark tariffs for most countries other than China were adjusted to 10%, the Bloomberg Economic Research team predicts that the "effective tariff rate" in the U.S. is currently close to 23%—the highest level in over a century. This has already severely impacted consumer and business confidence in the U.S The new round of global trade war ignited by Trump's tariff policy has further darkened the economic growth prospects for the United States and the global economy. Economists predict that the global trade war initiated by President Donald Trump will raise global prices, weaken consumer spending, and subsequently impact economic growth in the United States and even globally this year and next.

According to the latest survey compiled by Bloomberg of economists, the U.S. economy is expected to grow by 1.4% and 1.5% in 2025 and 2026, respectively, down from the previous month's forecast of 2% and 1.9%. The median of respondents now indicates a 45% probability of a recession in the U.S. over the next 12 months, compared to 30% in the March survey. According to the well-known Wall Street research firm BCA Research, the probability of a recession in the U.S. has exceeded 50%, while JP Morgan predicts a recession probability as high as 60%