Weekly Economic Report 3.28.25

President Trump injected another burst of uncertainty into the financial markets with his early announcement of 25% tariffs on the auto sector – erasing the rally sparked a week ago when he suggested he would be flexible on reciprocal actions. The economic data released today – which are a significantly lagging indicator given the speed of changes – showed that businesses and consumers have been girding themselves against the potential impact from widespread levies on imported goods. Businesses are reacting by raising prices on goods to fatten margins and collect some protective revenue before the tariffs hit. Consumers are pulling back, with a rising savings rate, especially on restaurant visits and travel. This double whammy of lower nominal growth and higher prices may drive first quarter real GDP close to zero. The Atlanta Federal Reserve’s GDPNow (adjusted for gold imports) sits at -0.5% -- but we still suspect they significantly overestimate imports or underestimate inventories, as they clearly do not show these goods were consumed.

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