After the record trade deficit in March, Wall Street predicts that the U.S. GDP will shrink in the first quarter

Under the panic buying wave triggered by Trump's tariff threats, the U.S. trade deficit soared to a record high, leading major Wall Street banks to lower their first-quarter GDP forecasts to negative values.

Data released on Tuesday showed that the U.S. goods trade deficit surged to $162 billion in March, far exceeding the $92.8 billion in March 2024, marking the highest level recorded since the early 1990s. This figure surpassed all of Bloomberg's forecasts for economists, indicating a significant drag on economic growth in the first quarter due to trade.

In response to this explosive data, Wall Street investment banks have lowered their forecasts for the U.S. economy. According to the Financial Times, Morgan Stanley significantly cut its first-quarter GDP forecast from zero growth to a year-on-year decline of 1.4%, stating, "The scale of the surge in imports before the tariffs was beyond expectations, and inventory did not offset this impact."

Similarly, Goldman Sachs revised its forecast from -0.2% to -0.8%, while JP Morgan adjusted its forecast from zero to -1.75%.

Companies Rush to Import, Data Severely Distorted

This astonishing trade deficit is almost entirely attributed to the surge in imports. Data shows that U.S. imports rose by 5% in March, reaching $342.7 billion, a significant increase of 31% compared to the same period last year. Among these, consumer goods imports surged by 27.5%, with notable increases in automobile and capital goods imports as well.

Behind this import frenzy is the panic buying by companies ahead of the tariff implementation. Oliver Allen, a senior U.S. economist at Pantheon Macroeconomics, stated, "The overall situation for the first quarter of 2025 is that Trump's tariff threats triggered a rush among companies to purchase goods before prices rose, leading to an astonishing surge in imports."

Meanwhile, U.S. goods exports only grew by 1.2%, reaching $180.8 billion, far below the increase in imports, further exacerbating the trade imbalance.

Despite the concerning trade data, many analysts believe that the GDP data set to be released on Wednesday will be severely distorted by this unusual period of stockpiling before the tariffs, potentially exaggerating the actual damage to the U.S. economy.

James Knightley, chief international economist at ING Bank, stated, "Today's trade data indeed highlights the risk of negative GDP, which clearly lays the groundwork for severe weakness in 2025. This is a massive stockpiling effort in response to tariffs... but we expect this situation to reverse soon: port data has already begun to slow."

"The information that GDP data will provide us is very limited," said Isabelle Mateos y Lago, chief economist at BNP Paribas, "The data will be filled with noise, largely reflecting the total of imports. You need to dig deep to truly understand the actual situation."