US Corporate Profits Tumble in Q1 Amid Tariff-Driven Uncertainty

Corporate profits in the US took a significant hit in the first quarter of 2025, as rising costs tied to import tariffs weighed heavily on businesses. According to the Bureau of Economic Analysis (BEA), profits from current production dropped by $118.1 billion—reversing a $204.7 billion surge seen in the previous quarter.

The sharp decline comes as President Donald Trump’s broad tariff policies continue to impact business confidence and consumer sentiment, while also triggering heightened volatility in financial markets.

A federal trade court recently blocked most of Trump’s proposed tariffs, ruling that he had overstepped his authority. While this ruling offered temporary relief, economists say it added more economic uncertainty.

The Federal Reserve echoed these concerns in minutes from its May 6–7 meeting, citing rising risks to both employment and inflation driven by tariff impacts.

As a result, many companies—especially in sectors like aviation, retail, and automotive—have stopped offering financial forecasts for 2025. The unpredictability of tariffs has prompted businesses to stockpile goods and consumers to make early purchases, further complicating economic assessments.

The flood of imports contributed to a modest 0.2% annualized GDP contraction in Q1, revised from an earlier estimate of a 0.3% drop. By contrast, Q4 2024 showed a 2.4% growth rate. Income-side data also pointed to a 0.2% decline in gross domestic income (GDI) for Q1, following a robust 5.2% increase in the prior quarter.

Averaging GDP and GDI—considered a more accurate reflection of economic health—indicates a 0.2% dip in overall economic activity for the first quarter, compared to 3.8% growth in Q4.