Kiplinger GDP Outlook: The Economy’s Slowdown Is Here
A surge in imports ahead of new tariffs caused GDP to contract in the first quarter, and the trade war will mean slow growth this year.

Kiplinger’s Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Click here for a free issue of The Kiplinger Letter or to subscribe for the latest trends and forecasts from our highly experienced Kiplinger Letter team.
First-quarter GDP contracted 0.3%. Imports surged, which detracts from the GDP numbers, as businesses and retailers sought to rush in imported goods ahead of threatened tariffs. The rise in imports subtracted five percentage points from first-quarter growth. This was partially counterbalanced by a three-point contribution by extra business spending on equipment and inventories.
The more moderate growth in consumer spending in the first quarter indicates that consumers had already begun pulling back somewhat even before the tariffs took effect, though large snowstorms in January and February may have played a role in that, too. The first-quarter GDP contraction would have been about 0.2 percentage points worse if not for a surge in car buying in March, ad of the April 2 effective date for the auto import tariff.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Storm clouds will loom over the economy as the year progresses. The trade war, if it is sustained, will hurt U.S. exports and could extinguish the recent revival in manufacturing. Consumer sentiment has dropped significantly, though much more so among Democrats and independents than among Republicans. The Trump administration has not only been cutting federal employees, but also canceling contracts that sustain government contractors and nonprofits. The ripple effect of canceled contracts beyond government agencies is unknown, but potentially high. Uncertainty is also likely to hurt business spending on equipment and hiring. Consumers may save more if they feel insecure about their jobs going forward. Foreign tourism is likely to be down as well, perhaps subtracting a tenth of a percentage point from GDP growth.
2025 GDP growth is likely to slow to a 1.5% pace or worse, down from 2.8% in 2024. Even without a trade war, the economy was likely to cool off. Consumer income growth was expected to be tempered by both fewer job gains this year and a stock market that was due for a breather after nearly 25% gains in each of the previous two years. With the market down about 10% from its February peak at the time of this writing, spending on big-ticket items like cars and renovation projects is likely to take a hit.
Source: Department of Commerce: GDP Data
Read more
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.
-
Do You Want An Extra $50,000 In Your 401(k)? Delay Retiring
Don’t think putting off retiring for six months to a year will have a meaningful impact? Think again. See how much it can help.
-
Ten Cheapest Places To Live in New York
Property Tax If you’re planning a move in New York, here are the counties with the lowest property tax bills in the Empire State.
-
May Fed Meeting: Live Updates and Commentary
The May Fed meeting is a key economic event, with Wall Street looking to see what Fed Chair Powell & Co. will do with interest rates amid tariff uncertainty. The May Fed meeting is a key economic event, with Wall Street looking to see what Fed Chair Powell & Co. will do with interest rates amid tariff uncertainty.
-
The Economic Impact of the US-China Trade War
The Letter The US-China trade war will impact US consumers and business. The decoupling process could be messy.
-
What Is the Buffett Indicator?
"It is better to be roughly right than precisely wrong," writes Carveth Read in "Logic: Deductive and Inductive." That's the premise of the Buffett Indicator.
-
What DOGE is Doing Now
The Kiplinger Letter As Musk's DOGE pursues its ambitious agenda, uncertainty and legal challenges are mounting — causing frustration for Trump.
-
A Move Away From Free Trade
The Letter President Trump says long-term gain will be worth short-term pain, but the pain could be significant this year.
-
Trump’s Whirlwind Month of Crypto Moves
The Kiplinger Letter The Trump administration wants to strengthen U.S. leadership in the cryptocurrency industry by providing regulatory clarity.
-
CPI Report Puts the Kibosh on Rate Cuts: What the Experts Are Saying About Inflation
CPI Consumer price inflation reared its ugly head to start the year, dashing hopes for the Fed to lower borrowing costs anytime soon.
-
Fed Leaves Rates Unchanged: What the Experts Are Saying
Federal Reserve As widely expected, the Federal Open Market Committee took a 'wait-and-see' approach toward borrowing costs.