The U.S. economy bounced back in the second quarter of 2025, expanding at a 3% annualized rate after posting its first quarterly contraction in three years.
According to the Bureau of Economic Analysis’s advance estimate, gross domestic product (GDP) growth outpaced economists’ expectations of 2.6%, as forecasted by Bloomberg. The rebound follows a 0.5% decline in Q1, which had been attributed to a surge in imports ahead of former President Trump’s sweeping tariff measures—an increase that weighed on GDP calculations.
The BEA noted that a drop in imports during Q2 helped boost the headline figure, as imports subtract from GDP. However, some economists caution against reading too much into the topline number.
Gregory Daco, chief economist at EY, warned the fluctuations are creating an “economic mirage,” masking signs of broader economic softening. “Policy uncertainty, resurgent inflation pressures from tariffs, and tighter immigration constraints are beginning to weigh more visibly on activity,” he said.
Supporting that view, Capital Economics’ North America economist Thomas Ryan pointed to slower growth in sales to private domestic purchasers—a key metric of underlying demand—which rose just 1.2% in Q2, down from 1.9% in Q1 and the weakest since 2022.
Still, Ryan maintained a cautiously optimistic outlook: “With some of that further slowdown due to temporary factors, such as the post-Liberation Day slump in oil prices, we continue to view the economy as broadly healthy.”
The Q2 GDP data covers April through June, capturing the impact of Trump’s broadest wave of tariffs but not reflecting additional updates that took effect in July. Investors continue to monitor the long-term effects of the most aggressive U.S. trade policy stance in a century.
While Trump’s “Liberation Day” tariffs initially rattled markets in April, recession fears have since cooled. According to Polymarket data, investor odds of a U.S. recession in 2025 have dropped to 17%, down sharply from a 66% peak on May 1.
Pump Radar
Stock Alerts