The Financial District of New York. Photographer: Jeenah Moon/Bloomberg.
U.S. corporate profits fell in the first quarter by the most since 2020, indicating large companies were already feeling some pressure prior to the Trump administration’s sweeping tariffs on global trading partners.
The 2.9 percent decrease in profits followed a 5.4 percent advance in the fourth quarter of last year, according to Bureau of Economic Analysis (BEA) data out today. Despite the drop, profits remained well above historical norms relative to gross domestic product (GDP), which fell 0.2 percent.
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The extent to which American companies choose to raise consumer prices in response to tariffs on imported goods has become a key question for the U.S. economic outlook in 2025. Wall Street economists generally expect inflation to pick up this year, hitting disposable household incomes and undercutting growth.
President Donald Trump recently singled out Walmart Inc. in a social media post after the retail giant warned of coming price increases. The president highlighted the company’s profits, arguing it should “‘EAT THE TARIFFS,’ and not charge valued customers ANYTHING.”
Details of today’s report showed that a measure of after-tax profits for nonfinancial firms as a share of gross value added—a proxy for margins—edged down to 15.7 percent from 15.9 percent, remaining well above levels that prevailed from 1951 to 2019. The modest decline suggests that large companies still have some room to absorb higher costs from tariffs without passing those on to consumers.
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