U.S. company profits fell by over $118 billion in the first quarter.
U.S. businesses faced a difficult start to 2025 as corporate profits plunged by $118.1 billion in the first quarter, according to the latest report from the Commerce Department’s Bureau of Economic Analysis. This decline follows a strong finish to 2024, when profits had climbed by over $200 billion.
The sharp fall is mainly linked to increased costs from tariffs and ongoing trade tensions that have shaken confidence in both markets and consumers. Although a recent ruling by a U.S. trade court blocked many of President Trump’s proposed tariffs, the back-and-forth around trade policy has only added to the confusion for businesses trying to plan.
During the first three months of the year, many companies and households tried to buy goods early to avoid price hikes, leading to a flood of imports. This activity distorted the economic outlook, making it hard to assess the real health of the economy. As a result, gross domestic product (GDP) declined at a revised annual rate of 0.2%, a slight improvement from the initial 0.3% estimate.
Firms Hold Back Forecasts Amid Ongoing Uncertainty
Big names in the airline, retail, and auto industries are holding off on issuing financial guidance for 2025. The main reason? The unpredictable nature of trade rules and the unclear direction of future tariffs. Many businesses are unsure how rising costs might affect operations in the coming months.
The Federal Reserve also reflected this growing concern in its latest meeting notes. Officials pointed out that risks to employment and growth had increased, mostly because of fears that more tariffs could worsen inflation and slow down business activity.
From another angle of measuring the economy, gross domestic income (GDI) figures show it also contracted by 0.2% during the same period. Combined with GDP, the average of the two, known as gross domestic product, dropped at the same rate. This measure, often viewed as a more balanced snapshot of the economy, had grown by 3.8% in the last quarter of 2024.
With profits down, costs rising, and confidence shaken, economists warn that unless stability returns to trade policy, the road ahead could remain bumpy for U.S. companies.
