The US economy grew by 3 percent in the second quarter of 2025, exceeding economists’ expectations. However, a closer look at the data reveals a more nuanced picture, with declining imports accounting for the bulk of the improvement and domestic demand rising at its slowest pace in two and a half years. Consumer spending ticked up moderately by 1.4 percent across both goods and services, after almost braking in the first quarter as US President Donald Trump’s tariffs created uncertainty.
Despite the White House’s claims of boosted investment in the US, the data tells a different story. Private sector investment plunged 15.6 percent in the second quarter, alongside a drop in inventories of 3.2 percent and a slowdown in non-durable goods manufacturing. “Today’s GDP release only further confirms that we’re in the midst of a policy-initiated slowdown,” said Skanda Amarnath, executive director of Employ America and former Federal Reserve economist. Gbenga Ajilore, chief economist at the Center on Budget and Policy Priorities, noted that “this second quarter estimate reflects this administration’s chaotic trade environment with a decrease in imports through a decrease in nondurable goods”.
The labor market also shows signs of slowing down, with job growth slowing and limited traction in sectors impacted by tariffs, including wholesale trade. The ADP private sector payroll report showed 104,000 jobs added last month, with revised figures from the previous month indicating a decline of 23,000 jobs. Daniel Hornung, senior fellow at MIT and former deputy director of the National Economic Council, said that “this morning’s report makes clear that tariffs and uncertainty were slowing the economy even in the first half of the year”.
The Federal Reserve is expected to keep interest rates steady at 4.25-4.50 percent, amid concerns about inflation and economic growth. Trump’s tariffs have had a limited impact on the global economy so far, but analysts fear the worst is yet to come. As Trump’s August 1 deadline looms, experts say tariffs are here to stay. “The data is clear, and there are no more excuses — now is the time for ‘too late’ Powell to cut the rates!” said White House press secretary Karoline Leavitt.
