• US GDP grew at an annualized rate of 3% in Q2, rebounding from a previous contraction.
• The growth figures are skewed by a decline in imports due to tariff impacts.
• Consumer spending has slowed significantly, despite moderate gains.
• Expectations for economic growth in the second half of the year remain tepid.
• Final sales to domestic purchasers indicate a worrying slowdown in underlying demand.

The U.S. economy rebounded in the second quarter of 2025, with gross domestic product (GDP) growing at an annualized rate of 3%, recovering from a contraction of 0.5% in the first quarter, marking the first GDP decline in three years, according to Reuters, NPR, and BBC.

However, this improvement is heavily influenced by trade dynamics; mainly, the reduction in imports, which were previously inflated as businesses scrambled to stockpile ahead of tariffs imposed by President Trump. Economists have expressed that this trade fluctuation distorts the true measure of economic health, highlighting that consumer spending grew at a modest 1.4%, down from 1.9% in the first quarter, indicating a slowdown in domestic demand amidst ongoing uncertainty from protectionist trade policies, according to Reuters.

The decline in imports added approximately 4.99 percentage points to GDP, overshadowing the 3.17 percentage points pulled down by inventories, which is another volatile component of GDP, as indicated by multiple reports, including those from Reuters and Reuters.

Experts anticipate sluggish economic performance in the second half of the year, projecting overall GDP growth to approximate 1.5% for the full year, a significant decline from the previous year’s 2.8%. This outlook is pertinent especially with the effective tariff rate remaining one of the highest since the 1930s, leaving about 60% of imports without trade agreements, as noted by BBC and Reuters.

Economists also predict that the Federal Reserve will maintain its benchmark interest rates within the 4.25%-4.50% range, resisting pressure to cut rates, primarily to provide stability against potential consumer spending decreases due to rising prices from tariffs per Reuters and BBC.

The data indicates a notable increase in consumer inflation driven by tariffs, which could hamper future consumer expenditure. Likewise, the contraction in residential investment for two consecutive quarters underscores the adverse effects of high mortgage rates and market unpredictability, as highlighted by Reuters and Reuters.