U.S. economy returns to growth in second quarter on trade swings
The U.S. economy grew at an annualized 3% rate in the second quarter, the Commerce Department said on Wednesday. Why it matters: America's economy is growi...
The U.S. economy grew at an annualized 3% rate in the second quarter, the Commerce Department said on Wednesday.
Why it matters: America's economy is growing again, as the import surge that depressed GDP in early 2025 reverses.
- Under the hood, consumer spending picked up — but business investment slowed notably, as President Trump's trade war weighs on the economy.
- Wednesday's report follows a weak first quarter, when the economy contracted at an annual rate of 0.5%, weighed down by historic importing activity as businesses sought to get ahead of tariffs.
By the numbers: The Commerce Department said that the GDP rebound primarily reflected a decrease in imports.
- Imports are a subtraction in the calculation of GDP. When imports surge, it pulls down the headline figure. The opposite happens when they plunge.
- For instance, the reversal in imports contributed more than 5 percentage points to the headline growth in the second quarter, after subtracting roughly 4 percentage points from the prior quarter's report.
Details: Personal consumption expenditures, a measure of consumer spending, rose at an annualized 1.4% rate — picking up from the 0.5% in the first quarter.
- But non-residential fixed investment — spending by businesses on buildings, equipment or technology — increased 1.9%, compared to the roughly 10% in the prior period.
The intrigue: For a snapshot of underlying growth, economists look at a narrow GDP measure that sums up consumer and business spending — and strips out volatile categories like trade and inventories.
- Final sales to private domestic purchasers, adjusted for inflation, rose at a 1.2% annualized rate, slowing from the 1.9% pace in the first quarter.
The bottom line: Look beyond the trade-distorted headline. The U.S. economy shows some signs of weakness in the second quarter as tariffs took effect.
What to watch: In recent days, Trump has announced trade frameworks with a 15% tariff baseline, which economists warn might crimp economic growth in the months ahead.
Editor's note: This story has been updated with additional data from the report
