US Q1 2025 GDP Forecast Turns Negative: Prediction Markets React to Tariff Uncertainty

Recent shifts in prediction markets like Polymarket and Kalshi signal growing pessimism towards the US economy. As of April 29th, both platforms project a US economic contraction during the first quarter of 2025, a stark contrast to consistent positive growth since 2022.

This bearish turn is significant. Kalshi’s consensus Q1 growth estimates plummeted from approximately 0.5% to -0.4% in under 24 hours on April 29th. Simultaneously, Polymarket places the odds of a Q1 contraction at around 70%, a dramatic change from their previous outlook.

This market shift follows Canada’s election of Mark Carney as prime minister, who has adopted a more assertive approach to the ongoing US-Canada trade dispute. This heightened trade tension contributes to the economic uncertainty.

The markets are anticipating the April 30th report from the US Bureau of Economic Analysis, which will provide crucial insights into the impact of recent trade policies.

Prediction markets, by allowing users to trade contracts linked to specific events, provide a unique barometer of economic sentiment. Their 2024 accuracy in forecasting the US elections underscores their potential predictive power.

Tariff Turmoil and Economic Uncertainty

President Trump’s tariff policies, while partially paused, continue to generate considerable economic uncertainty. The impact is evident in April’s Philadelphia Federal Reserve Manufacturing Index, which registered its sharpest decline since 2020.

This downturn reflects manufacturers’ concerns about rising production costs due to tariffs. The overall economic outlook remains uncertain, pending the official GDP report.

Disclaimer: This analysis is based on prediction market data and does not constitute financial advice.