The US economy rebounded in the second quarter of 2025 with GDP growth of 3.3%, according to Commerce Department data. This came after the economy shrank 0.5% in the first quarter, the first decline in three years due to a surge in imports before Trump’s new tariffs were implemented. A sharp 29.8% drop in imports in April–June was the main driver, contributing more than 5 percentage points to growth.
Consumer spending, which accounts for 70% of the economy, rose 1.6%, which was better than the first quarter but still modest. However, private investment fell 13.8%, the biggest decline since the start of the 2020 pandemic, partly because inventory drawdowns knocked 3.3 percentage points off GDP growth. Federal government spending also fell 4.7% after falling 4.6% in the previous quarter.
Despite the challenges, the underlying measure of economic strength that excludes exports, inventories, and government spending grew 1.9%, the same as the first quarter. This suggests that while external factors have had a major impact, the fundamentals of domestic demand remain resilient.
Since returning to the White House, Trump has imposed massive tariffs on imports from almost every country, arguing that it will protect American industry and fund tax cuts. But economists warn that the tariffs risk raising costs, reducing the efficiency of domestic companies, and fueling inflation. More worryingly, Trump’s erratic approach to implementing the tariffs has created uncertainty for investment and hiring.
