U.S. economy returns to growth in second quarter on trade swings
Add Axios as your preferred source to
see more of our stories on Google.
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.
