Tariffs again skew number on domestic economic growth
By: Paul Davidson
USA Today
..... President Donald Trump's global trade war has again distorted the broadest snapshot of the U.S. economy - this time creating a brighter picture.
.....
The economy grew solidly in the second quarter. The nation;s gross domestic product, the value of all goods and services made in the United States, grew at a seasonally adjusted annual rate of 3% in the April-June [2025] period, the commerce Department said July 30. [2025]
..... But forecasters traced the showing to the reversal of a tariff-related import surge hat caused output to shrink early in 2025.
..... Consumer spending and business investment increased modestly and growth is projected to slow further in the second half of the year [0225] as more of Trump's import fees filter into retail prices, reignite inflation and sap consumer purchasing power.
..... A power telling gauge of the economy's health that captures consumer and business spending but strips out trade, inventories and government outlays - called final sales to private domestic purchasers - rose a modest 1.2%, down from 1.9% in the first quarter.
..... "Underlying growth was weak in Q2 and took a material step down in the first half of this year [2025] compared to 2024," economist Oliver Allen of Pantheon Macroeconomics wrote in a note to clients.
..... Already the prospect of hefty tariffs has sparked inflation worries, and a slowing labor market has crimped income gains. Although the White House has struck trade deals with some countries, the average U.S. tariff rate still has shot up to about 20% form less than 3% early in 2025, Nationwide economist Kathy Bostjancici estimated. Economists surveyed by Wolters Kluwer projected growth of less than 1% in the third and fourth quarters.
..... Trump boasted about the GDP figure in a post on Truth Social, calling it 'WAY BETTER THAN EXPECTED!"
.....
The gain in economic output was artificially boosted by a sharp drop in imports, just as the 0.5% decline in GDP the first three months of the year [2025] - the economy's first contraction in three years - was rooted in a historic spike in shipments from foreign countries.
..... Retailers and manufacturers in the United States raced to order foreign goods early in the year [2025] before the new levies took effect.
..... Consumer spending grew 1.4% following a meager 0.5% gain in the first quarter - but that's half of last year's [2024] pace. Consumption makes up 70% of economic activity.
..... Business investment rose 1.9% after surging 10.3% the previous quarter. Company purchases of computers, delivery trucks, factory machines and other equipment grew a fairly healthy 4.8%.
..... Housing construction and renovation slid 4.6%, its fourth decline in the last five months. Builders are concerned that tariffs will sharply increase the cost of lumber, steel, aluminum and other boodling materials.
..... Government outlays rose just 0.4%. Federal government spending fell 3.7% as the Department of Government Efficiency team continued its hefty budget cuts and layoffs. State and local spending increased 3%.
..... Contributing: Josy Garrison, USA Today