Consumers Did Not Front-Run Tariffs—and That’s a Good Thing: Part I
The latest GDP report lit a fire under recession chatter. Real GDP contracted at a 0.3 percent annual rate in the first quarter of 2025—the first decline since 2022. That headline number had some economists and pundits reaching for panic buttons.
“Worries that the US economy is headed for a recession thanks to President Donald Trump’s tariffs are mounting in the wake of new data showing the US economy shrank in the first quarter,” declared Morningstar’s Sarah Hansen. “The contraction is seen as an early sign that Trump’s levies, which have already stoked anxiety among investors and pessimism among consumers and businesses, are weighing on real measures of economic activity. While the import surge may be a temporary phenomenon, there are broader concerns that a more pronounced economic slowdown may be ahead.”
That sure sounds ominous. Notice the use of the passive voice. “Worries…are mounting,” Hansen writes, as if worries had agency or were somehow mounting themselves. “The contraction is seen” not by anyone in particular—certainly not legacy media journalists stoking fear about the Trump economy—but just by markets or consumers or the Omniscient Narrator Himself. We learn that “there are broader concerns” but not who actually has those concerns. They’re just out there, you know, part of the Zeitgeist.
But what actually happened was nothing like a collapse in consumer demand that usually would accompany a recession. It was a flood of imports, driven by businesses front-running tariffs—a distortion that subtracts mechanically from GDP. And far from a sign of economic weakness, this front-running is best understood as a vote of confidence in future sales.
Meanwhile, the supposed culprit of the import surge—consumer panic buying—simply isn’t real. Consumers are not front-running the tariffs. And that, too, is good news. If they were, demand would be pulled forward and set to sag in future quarters. But it hasn’t been. That means the runway ahead may be longer than expected.
Businesses Were Behind the Import Surge
The GDP report makes it plain where the distortion came from. Real goods imports surged at a 50.9 percent annualized rate—one of the steepest jumps in modern history. That alone was enough to push GDP into negative territory, with net exports subtracting a staggering 4.8 percentage points from growth.
According to Bank of America’s economics team, the contraction was driven by tariff-related front-loading of imports, which wasn’t fully offset by inventory accumulation or final demand. From an accounting standpoint, imports are subtracted from GDP—but in practice, much of what gets imported is eventually counted in consumption or investment. When the timing of these flows gets out of sync—as it did in Q1—it can produce misleading results. BofA also notes that inventory accumulation may have been understated in the advance estimate, meaning some of the missing offset could show up in revisions.
Far from the GDP showing collapsing demand, it signaled robust domestic growth. In fact, final domestic sales—GDP excluding trade and inventories—rose at a 2.3 percent rate, reflecting strong underlying momentum.
The composition of those imports confirms what’s happening. The Bureau of Economic Analysis pointed to sharp increases in pharmaceuticals, medical supplies, and computer equipment—precisely the kinds of goods importers race to bring in ahead of expected tariffs. These aren’t impulse buys by households. They’re strategic purchases by wholesalers and large retailers preparing for what they believe will be continued strong demand, but at higher costs.
In Part II, which will run tomorrow, we’ll expand on the evidence that consumers were not behind the import surge and why that’s a bullish sign for the economy.
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