US Q2 GDP Growth Masks Weak Domestic Demand

The U.S. economy grew at an annualized rate of 3.0% in the second quarter of 2025, exceeding expectations and rebounding from a 0.5% contraction in the first quarter. This growth was primarily driven by a sharp drop in imports after a first-quarter surge as businesses rushed to beat tariffs imposed by President Trump, leading to an artificial boost in GDP. Consumer spending increased modestly by 1.4%, but business investment and domestic demand stayed subdued, signaling weaker underlying momentum. Economists noted that real final sales to domestic purchasers, a key measure of core economic health, rose just 1.1%–1.2%, the slowest pace since late 2022. Analysts warn that the effects of tariffs and trade policy uncertainty could slow growth further in the second half of the year. Concerns remain about the sustainability of current growth amid rising costs for imported goods.