Data released last week showed that United States pre-tax corporate profits fell US$118.1 billion, or 2.9 percent, in the first quarter, the fastest pace since 2020, suggesting companies are feeling the pinch from tariffs even before they have properly started to bite. After-tax profits fell 3.6 percent.

But any sense of alarm should be mitigated by the fact that profits surged $205 billion, or 5.4 percent, the three months before. The decline in the January-March period was simply normalization on the back of a bumper quarter.

And on a year-on-year basis, profits were up more than 5 percent.

True, the next few quarters could get messy. If growth slows or inflation starts to rise, corporate margins could get squeezed, consumers may curb spending and companies could find themselves with limited pricing power.

But zoom out, and the bigger picture suggests the business world of the United States has rarely been stronger.

Depending on how you slice and dice the figures, corporate profits as a share of national output or income are still extraordinarily high. In some cases, they are close to the highest on record.

Consider pre-tax profits with inventory valuation and capital consumption adjustments. These fell slightly to 13.0 percent of GDP in the first quarter of this year, on a seasonally-adjusted annual basis, but that was from a record 13.5 percent in the September-December period.

After-tax profits dipped to 12 percent of GDP from 12.2 percent in the final quarter of last year. Again, that was a small decline, and it leaves after-tax profits still near the all-time peak of 12.8 percent of GDP recorded in the second quarter of 2021. The average over the past 75 years is less than 7.5 percent of GDP.

To paraphrase former British prime minister Harold Macmillan, the business world of the United States has never had it so good. Which is just as well, because headwinds are gathering.

One can debate how much any of the number of brewing risks will land on the real economy, but companies could certainly feel some pain if they end up facing the collective punch of tariffs, weakening consumer demand, diminishing pricing power and higher-for-longer interest rates.

"An increasingly fragmented environment means diverging trends across economies. It's an environment [...] that will constrain profits at home and around the world," says Gregory Daco, chief economist at EY-Parthenon.

Tariffs and protectionism will put the squeeze on global supply chains and overall trade. It will be interesting to observe how the divergence between domestically-generated profits and earnings accrued from the rest of the world (RoW) plays out in this environment.

Domestic profits account for the majority of total income, of course, but that share has exploded recently. Or looked at the other way, the share of profits from abroad has plunged. If Trump's trade war succeeds in prompting US companies to bring more production back home, the 'RoW' footprint may shrink further.

In the fourth quarter of 2019, just before the pandemic, domestically-generated profits were around 75 percent of the $2.13 trillion total, on a seasonally-adjusted annual basis, and 'RoW' profits accounted for a quarter. In the first three months of this year, domestic profits accounted for 87.5 percent of the total, and the share of profits from abroad had halved to 12.5 percent.

Corporate profitability is being tested. The aggregate second quarter earnings growth forecast for S&P 500 companies stands at 5.5 percent, according to LSEG I/B/E/S, down from 10.2 percent two months ago. The 2025 calendar year earnings growth forecast has shrunk to 8.3 percent today from 14.0 percent at the start of the year.

The challenges are mounting, but the business world of the United States can face them from a position of strength.

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The author is a columnist for Reuters. The views expressed are personal.