After a rocky start to 2025, the U.S. economy rebounded strongly in the second quarter, according to updated data released by the Commerce Department on Thursday.
The improved report follows a turbulent first quarter that saw economic output contract for the first time in three years amid ongoing trade tensions, according to The Associated Press.
Gross domestic product (GDP), the broadest measure of economic activity, expanded at a 3.3% annual rate from April through June — up from the government’s initial 3% estimate in July.
That bounce-back follows a 0.5% decline in the first quarter, driven largely by an import surge as businesses rushed to stock up ahead of newly announced tariffs under President Donald Trump.
The Commerce Department noted that imports fell sharply in the second quarter, dropping at a 29.8% pace, which added more than five percentage points to GDP growth for the quarter.
The president’s aggressive tariff strategy has become a defining feature of his second term, disrupting global supply chains and prompting heated debate over its impact on the U.S. economy.
Since returning to the White House, Trump has moved to reshape American trade policy with sweeping tariffs on goods from nearly every major trading partner. Specific products such as steel, aluminum, and autos have been hit particularly hard.
Trump defends his approach as necessary to protect American jobs and industries.
He has argued that the tariffs not only incentivize companies to move factories back to the United States but also help fund the substantial tax cuts he signed into law on July 4. However, many mainstream economists warn the trade war is creating headwinds for the economy.
Despite the uptick in growth, the report also highlighted ongoing challenges. Private investment declined at a 13.8% annual pace from April to June — the steepest drop since the height of the pandemic in 2020. A sharp reduction in inventories also subtracted 3.3 percentage points from overall GDP growth.
Even so, consumer spending — which accounts for roughly 70% of the U.S. economy — rose at a 1.6% annual pace, higher than the previous quarter’s 0.5% and an improvement over the earlier estimate of 1.4%.
The Commerce Department also revised upward its estimate of a key metric used to gauge the economy’s underlying health — which excludes exports, inventories, and government spending — showing 1.9% growth for both the first and second quarters.
“Giving people confidence to open their wallets”
Heather Long, chief economist at Navy Federal Credit Union, said the job market remains a bright spot and is supporting consumer confidence even in the face of higher prices and uncertainty.
“The resilience of the job market — the government also reported Thursday that fewer people applied last week for unemployment benefits — is ‘giving people confidence to open their wallets for the basics and some little splurges,’” she said.
Still, she added, “the economy [is likely to] stay in a slower speed mode with spending and growth around 1.5% as the tariffs become more visible to American consumers.”
Trump’s critics — particularly economists long skeptical of protectionist trade measures — warn that tariffs raise costs for American importers, who often pass the increases onto consumers in the form of higher prices. Though the inflationary impact has so far been modest, the long-term effects remain uncertain.
Many business leaders have also expressed frustration over the unpredictable nature of the tariff rollouts, which have included last-minute announcements, delays, and abrupt shifts.
“The erratic way Trump has imposed the tariffs — announcing and suspending them, then coming up with new ones — has left businesses bewildered and uncertain about investments and hiring,” the report noted.
Spending by the federal government, meanwhile, fell 4.7% in the second quarter, following a similar 4.6% decline in the first. That belt-tightening, paired with investment volatility, has economists watching closely as the third quarter unfolds.
For now, however, the economy appears to have regained its footing — even if uncertainty still lingers.
