Chart Book April 2025

Market Commentary – May 14, 2025

The U.S. economy shrank by 0.3% in the first quarter of the year – the first contraction in three years – largely due to a surge in imports as businesses rushed to beat incoming tariffs. Although consumer and business spending remained strong, much of it was front-loaded in anticipation of rising costs. The trade deficit hit a record high, shaving off nearly 5 percentage points from GDP, driven by a 41.3% rise in imports. While inventory buildup helped offset the impact, it could weigh on future growth. Uncertainty and high inflation have led businesses and households to act cautiously. Despite solid domestic demand and business investment, President Trump’s unpredictable tariffs, including his “Liberation Day” duties on imports, have triggered market uncertainty and a trade war with China.