After a record commodity trade deficit in March, Wall Street believes U.S. GDP will shrink in the first quarter

Source: Wall Street News

Amid a wave of panic buying triggered by Trump's tariff threats, the US trade deficit soared to a record high, causing major Wall Street banks to lower their GDP forecasts for the first quarter to negative values.

Data released on Tuesday showed that the US goods trade deficit in March soared to $162 billion, far exceeding the $92.8 billion in March 2024, reaching the highest level since records began in the early 1990s. This figure exceeded all the forecasts of economists by Bloomberg, indicating that trade had a huge drag on economic growth in the first quarter.

Facing this explosive data, Wall Street investment banks have successively lowered their forecasts for the US economy. According to the Financial Times, Morgan Stanley sharply cut its first-quarter GDP forecast from zero growth to a year-on-year decline of 1.4%. They bluntly stated: "The scale of the surge in imports before the tariffs exceeded expectations, and inventories did not offset this impact."

Similarly, Goldman Sachs lowered its forecast from -0.2% to -0.8%, and JPMorgan Chase adjusted its forecast from zero to -1.75%.

Companies Rush to Import, Severely Distorting the Data

This astonishing trade deficit is almost entirely attributed to the skyrocketing imports. The data shows that US imports increased by 5% in March, reaching $342.7 billion, a significant increase of 31% compared to the same period last year. Among them, the import of consumer goods surged by 27.5%, and the imports of automobiles and capital goods also increased significantly.

Behind this import frenzy is the panic stockpiling of companies before the implementation of tariffs. Oliver Allen, a senior US economist at Pantheon Macroeconomics, said: "The overall situation in the first quarter of 2025 is that Trump's tariff threats triggered a rush among companies to buy goods before the price increase, leading to an astonishing surge in imports."

At the same time, the value of US goods exports only increased by 1.2%, reaching $180.8 billion, far less than the increase in imports, further exacerbating the trade imbalance.

Despite the worrying trade data, many analysts believe that the GDP data to be released on Wednesday will be severely distorted by this extraordinary stockpiling period before the tariffs, which may exaggerate the actual damage to the US economy.

James Knightley, chief international economist at ING Bank, said: "Today's trade data does highlight the risk that GDP may be negative, which obviously lays the foundation for a serious slowdown in 2025. This is a large-scale stockpiling effort in response to tariffs... But we expect this situation to reverse soon: port data has already started to slow down."

"The GDP data will tell us very little," said Isabelle Mateos y Lago, chief economist at BNP Paribas. "The data will be full of noise and largely reflect the sum of imports. You need to conduct a really in-depth analysis to see the actual situation clearly."

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