US GDP rebounds 3.3% in Q2 as imports plunge after tariff surge, consumer activity firms up

August 28, 2025 | admin | Latest News

The US economy staged a strong rebound this spring, recovering from its first contraction in three years as imports fell and consumer activity firmed.

The Commerce Department reported Thursday that gross domestic product grew at a 3.3% annualized pace from April through June, compared with a 0.5% decline in the first quarter.

The latest estimate marked an upward revision from the government’s July projection of 3% growth and exceeded economists’ expectations of a 3.1% expansion.

The first-quarter downturn had largely reflected businesses frontloading imports to get ahead of higher tariffs imposed by President Donald Trump.

“Looking ahead, real GDP growth is expected to slow further, with the economy approaching stall-speed dynamics by year-end as the combination of tariff-related cost increases, persistent policy uncertainty, curtailed immigration and elevated interest rates weighs on business investment, household consumption and housing activity,” said Gregory Daco, chief economist at EY-Parthenon.

“We expect real GDP growth of 1.5% and 1.3% in 2025 and 2026, respectively, with Q4 2025 growth slowing to a mere 0.8%.”

MACRO: 🇺🇸 US GDP for Q2 was revised upwards with inflation revised down.

‣ Q2 GDP 3.3% vs 3.0% Initial
‣ PCE Price Index 2.0% vs 2.1% Initial

6:19 pm · 28 Aug 2025

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Imports plunge after tariff-driven surge

Imports, which subtract from GDP, had surged early in the year as firms rushed to stockpile foreign goods before tariffs took effect.

That surge reversed in the second quarter: imports dropped at a steep 29.8% annual rate, a swing that added more than 5 percentage points to GDP growth.

The Bureau of Economic Analysis (BEA) said the rebound primarily reflected this downturn in imports combined with an acceleration in consumer spending.

However, analysts cautioned that such sharp swings distort the underlying picture of economic health.

Consumer spending shows modest improvement

Consumer spending, which drives about 70% of US economic activity, grew at a 1.6% annual rate in the second quarter.

While still modest, this was stronger than the 0.5% increase in the first quarter and above the initial 1.4% estimate for April-June.

Business investment was also revised upward but remained weak overall.

Private investment fell at a 13.8% annualized pace, the steepest drop since mid-2020 during the height of the pandemic.

A sharp drawdown in inventories shaved 3.3 percentage points from second-quarter GDP growth.

Government spending also contracted for a second consecutive quarter, falling at a 4.7% rate following a 4.6% drop in the first quarter.

Underlying strength steadier than headline swings

Economists often look beyond the headline GDP number to gauge the economy’s true trajectory.

One measure, final sales to private domestic purchasers—which excludes trade, inventories, and government spending—rose at a 1.9% annual rate in the second quarter.

That matched the pace in the first quarter and was significantly stronger than the government’s earlier estimate of 1.2%.

This steadier gauge suggests that while trade-related volatility has distorted recent GDP readings, domestic demand is holding at a modest but consistent pace.

Trade policy casts shadow over outlook

Since returning to the White House, Trump has upended decades of bipartisan support for freer trade, imposing broad tariffs on imports from nearly every country.

Steel, aluminum, and autos have been particular targets, and businesses continue to adjust supply chains to cope with higher costs.

While the second-quarter rebound reassured some analysts, many caution that the economy’s path remains tied to unpredictable trade dynamics.

Both the first-quarter contraction and the second-quarter surge reflected the timing of import flows rather than a clear shift in underlying strength.

Economists say the coming quarters will offer a truer picture as the U.S. economy adjusts to new tariff regimes. For now, consumer demand and private investment remain the critical measures to watch.

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