Key Takeaways
- The U.S. Gross Domestic Product grew at an annual rate of 3% in the second quarter.
- The economic growth rebounded after the economy shrank by 0.5% in the first quarter.
- The downtick and recovery were largely due to a surge and subsequent drop-off of imports, as businesses responded to President Donald Trump’s tariffs.
U.S. economic output recovered in the second quarter after falling in the first—at least on paper.
The Gross Domestic Product grew at an inflation-adjusted annual rate of 3%, a rebound from the 0.5% decline in the first quarter, the Bureau of Economic Analysis said Wednesday. That was more than economists expected and higher than the average of 2.5% since 2010.
However, both the decline and the uptick could be traced back to a surge in imports followed by a steep drop-off.
The uptick in GDP said more about changes in trade patterns than the economy’s overall trajectory, economists said. Imports surged in the first quarter as businesses stocked up on foreign-made products ahead of Trump’s tariffs, and then fell after the import taxes began to go into effect. Imports are counted against the GDP to avoid anything being double-counted.
President, Economists Have Different Reactions to GDP
President Donald Trump pointed to the GDP growth as evidence of the success of his economic policies.
“2Q GDP just out: 3%, way better than expected!” Trump posted in all capital letters on social media.
However, economists said the economic picture is murkier when all facets of the report are taken into account.
“Headline numbers are hiding the economy’s true performance, which is slowing as tariffs take a bite out of activity,” Kathy Bostjancic, chief economist at Nationwide, wrote in a commentary.
Setting aside the swings in international trade, key aspects of the report pointed to an economy that is not accelerating but not outright crashing. For example, real final sales to domestic purchasers, a category that includes consumer spending and business investment, rose at a 1.2% annual rate, down from 1.9% in the first quarter.
“Beneath the topline figure, the economy is switching to a lower gear but not going in reverse,” Bernard Yaros, lead U.S. economist at Oxford Economics, wrote in a commentary.
Resilient Economy Lowers Chances Of Fed Rate Cut
Trump used the report to once again pressure Federal Reserve Chair Jerome Powell to cut the central bank’s benchmark interest rate, referring to the Fed chief by a derogatory nickname the president coined.
“‘Too Late’ MUST NOW LOWER THE RATE. No Inflation! [sic] Let people buy, and refinance, their homes!” Trump posted on social media.
The Fed has kept the fed funds rate higher than usual this year, putting upward pressure on borrowing costs on all kinds of loans, out of concern that President Donald Trump’s tariffs could stoke inflation.
Wednesday’s report showed “core” PCE inflation running at 2.5%, above the Fed’s target of a 2% annual rate. Overall, the data could encourage the Fed to keep interest rates steady, not lower them, economists said.
The central bank is widely expected to keep the rate steady when it announces its policy decision Wednesday afternoon. In the wake of the GDP report, traders lowered their bets for a cut at the following meeting in September, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data. They cut the odds to 60% from 65% the day before,
“The economy’s resilience will allow the Federal Reserve to hold still and assess the unfolding tariff impact on consumer prices before pivoting to interest rate cuts in December,” Yaros wrote.
Update, July 30, 2025: This article was updated to provide additional details of the report and reaction from economists and President Donald Trump. This article was originally published July 30, 2025.