American corporations experienced a significant profit surge in the fourth quarter, but looming trade disruptions fueled by new tariffs are generating economic uncertainty. Economists warn that businesses may resort to job cuts to safeguard profit margins amid the turbulence.
The Commerce Department’s latest report, released Thursday, also revised economic growth upward for the final quarter of last year, citing a spike in preemptive purchases of high-cost goods—such as automobiles—before impending import duties take effect.
Since taking office, President Donald Trump has rolled out an array of tariffs, with his latest move imposing a 25% duty on imported cars and light trucks, set to begin next week. Experts argue that the erratic nature of these trade policies could stifle economic momentum, dampening both consumer and business confidence.
With major trade partners expected to retaliate with their own tariffs, fears of a potential recession are intensifying. “Profit margins are a key recession indicator. Prior to these tariff disruptions, there was little reason to anticipate a downturn in 2025,” said Conrad DeQuadros, senior economic advisor at Brean Capital.
The Bureau of Economic Analysis reported a robust $204.7 billion increase in corporate profits last quarter, reflecting a 5.4% growth rate, compared to a $15 billion decline (0.4% contraction) in the previous quarter. For the full year, profits jumped $281.3 billion in 2024, building on a $229.8 billion increase in 2023.
A metric closely mirroring S&P 500 earnings surged at a 6.7% rate, reversing a slight dip from the prior quarter. Job Market Remains Resilient—For Now
Strong corporate margins have helped prevent widespread layoffs, according to Ryan Sweet, chief U.S. economist at Oxford Economics. However, he warns that an economic slowdown or rising costs due to tariffs—especially if companies struggle to pass them onto consumers—could pave the way for workforce reductions.
Supporting this cautious optimism, a separate Labor Department report showed that jobless claims dipped by 1,000 to a seasonally adjusted 224,000 for the week ending March 22, aligning with analysts' expectations. However, businesses remain hesitant to expand hiring, making it tougher for displaced workers to secure new employment.
Economists predict that the Trump administration’s aggressive trade stance, coupled with sweeping government downsizing efforts—including deep budget cuts and large-scale federal layoffs—could further disrupt labor market stability.
Despite these challenges, the number of individuals continuing to receive jobless benefits fell by 25,000 to 1.856 million for the week ending March 15, hinting at a still-resilient employment landscape. However, if tariff-driven headwinds persist, the broader economic outlook may darken in the months ahead.