Quarterly Outlook: Slower Growth Expected Amid Shifting Trade Policies

Main Takeaway

The U.S. economy shows early signs of slowing in 2025 as uncertain trade policy rattled markets in the first quarter and into early April. As of April 3, the Atlanta Fed projected a 2.8% contraction for the first quarter, driven by slower consumer spending and a surge in imports ahead of tariffs.

Top Risks

The risk of a broader trade war has escalated with the Trump administration's early April announcement of new tariffs, which triggered swift and negative responses from the market and U.S. trade partners. Consumer spending has slowed, consumer confidence has declined, and small business uncertainty is nearing its highest level since the 1970s.

Sources of Stability

The consensus odds of a recession remain low at around 35%. Some challenges that slowed economic growth in the first quarter, like poor weather and a spike in imports ahead of potential tariffs, are unlikely to happen again in the second quarter. While the tariffs in particular raised uncertainty, it is anticipated this will most likely cause a temporary slowdown.

For our latest perspectives on markets and economic conditions, view our Quarterly Outlook report for Q2 2025.

Sources: Atlanta Fed, CNBC, and Apollo Academy.

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