(TNND) — Growth in the U.S. economy beat expectations in the second quarter, but evolving tariffs might be keeping the economic waters unsettled.
The Commerce Department reported Wednesday morning that second-quarter gross domestic product increased at an annual rate of 3%, better than the forecast of 2.3% or 2.5%, depending on the source.
That’s a rebound from a 0.5% first-quarter drop, which had marked the first quarterly contraction since early 2022.
The GDP is the most general measure of the U.S. economy. And President Donald Trump celebrated the growth via social media as “WAY BETTER THAN EXPECTED!”
Trump also renewed his call for the Federal Reserve to lower interest rates, which the Fed has resisted under the threat of a potential resurgence of inflation.
Colorado State University economist Stephan Weiler said via email that the 3% GDP growth is “superficially” great, but it is built almost entirely on the reduction of imports thanks to tariffs and the threat of tariffs.
An increase in consumer spending also contributed to the rise in GDP.
“Consumers – 70% of the economy – are still buying – possibly ahead of more expensive goods with tariffs,” Weiler said. “Christmas in July suggests that some folks are indeed moving spending forward.”
Bankrate Financial Analyst Stephen Kates, a certified financial planner, said retailers tried to buffer themselves from the impact of tariffs by pulling forward imports as much as possible.
There was a lot of noise in the first-quarter GDP, and we could see more of that with the second-quarter GDP.
Kates noted that Wednesday’s GDP release was only a preliminary reading that can move around over the next two revision periods.
“It’s hard to have more noise than Q1. But there was so much pull forward in Q1 around inventories and imports and all that, and that created a lot of sort of messiness in the data,” Kates said. “And you know, I think that things toned down and sort of started to normalize through the end of Q2.”
Trump announced a slew of country-specific “liberation day” reciprocal tariffs in early April.
Those tariffs were paused a week later so the administration could negotiate more favorable trade deals with other countries. But Trump maintained a 10% baseline tariff on most countries, with higher tariffs on China, Canada, Mexico and on some products.
Trump has secured a handful of trade deals, including ones with the European Union and Japan.
But the deadline arrives Aug. 1 for some of the higher reciprocal tariffs to be reinstated.
Labor economist Aaron Sojourner also gave a nod to the tariff impact in a Bluesky post.
Sojourner noted that despite the 3% second-quarter growth, GDP grew just 1.3% in the first half of 2025.
Import spikes distorted the first quarter, and the drop in imports may have distorted the second quarter, as well.
Sojourner said averages and core measures showed growth slowed in the first half of the year.
Kates said neither of the last two quarters should be taken in a vacuum.
“They are sort of two halves of the same whole,” Kates said. “You know, Q2 was sort of the opposite and in response in some ways to what happened in Q1. It was the post-tariff as opposed to the pre-tariff.”
In that light, 1.3% GDP growth, or 1.25% as Kates noted, is somewhat weak, he said.
Kates also said a surge of imports in the first quarter skewed GDP.
And the second quarter saw the largest quarter-to-quarter drop in imports since the second quarter of 2020.
He pointed out that real final sales to domestic purchasers fell for the third quarter to reach its lowest reading since the final quarter of 2022, when inflation was still strong-arming consumers.
“Real final sales is a really good indicator of how domestic demand is shaping up, because it strips out all the imports and government spending and all of that, which has been sort of up and down through Q1 and Q2, and looks at what’s happening in the U.S.,” Kates explained. “And consumer spending is lower than it was in 2024. Investment in Q2 was negative. And so, that is really sort of a big negative on the real final sales number and has been the reason that we’re seeing declining real final sales over the last three quarters.”