The U.S. economy posted a stronger rebound in the spring of 2025 than initially believed, with the government’s latest estimate showing gross domestic product (GDP) growing at an annual rate of 3.3 percent in the second quarter. The figure, released on August 28 by the U.S. Bureau of Economic Analysis (BEA), is an upward revision from the previously reported 3.0 percent. It marks a sharp turnaround from the first quarter, when the economy contracted by 0.5 percent, a decline that was largely the result of a surge in imports before the implementation of new tariffs.
That contraction raised concerns about the possibility of a slowdown, but the second-quarter results have restored some optimism. Economists noted that while the upward revision underscores the resilience of the economy, the underlying data point to uneven trends that could weigh on growth in the months ahead.
Import Decline and Consumer Spending Fuel Recovery
A central driver of the rebound was a significant 29.8 percent drop in imports, which alone contributed around 5 percentage points to GDP growth, as imports are counted as a subtraction in national accounts. Businesses had stocked up earlier in the year on foreign goods in anticipation of higher trade barriers, leading to a sharp reversal in the second quarter.
At the same time, consumer spending—which makes up about 70 percent of economic activity—expanded at a 1.6 percent annual pace, recovering from a rare 0.5 percent decline in the first quarter. The new figure is slightly stronger than the 1.4 percent originally reported. Household demand was supported by a robust labor market, with unemployment remaining near historic lows, helping to offset concerns about rising costs from tariffs and higher interest rates.
However, not all sectors contributed positively. Private investment recorded a steep decline of 13.8 percent, the sharpest drop since mid-2020, when the economy was still grappling with pandemic-related shutdowns. A drawdown in business inventories shaved nearly 3.3 percentage points off growth, suggesting companies are cautious about stockpiling amid policy uncertainty.
Government spending also provided little support. Federal outlays fell by 4.7 percent, following a 4.6 percent decrease in the prior quarter. The cutbacks reflect efforts to restrain discretionary spending, even as defense allocations and tariff revenues shift fiscal priorities.
Economic Fundamentals and Policy Impacts
Economists often look beyond headline GDP to a measure that strips out volatile categories such as trade, inventories, and government spending. That core figure showed the economy expanding at 1.9 percent, unchanged from the first quarter, and viewed as a better gauge of underlying momentum.
The outlook remains closely tied to President Donald Trump’s trade agenda, which has reshaped global commerce since his return to office. His administration has implemented a broad range of double-digit tariffs on imports of steel, aluminum, automobiles, and consumer electronics, with the stated goal of protecting U.S. manufacturers, bringing supply chains back onshore, and raising revenue for the tax cuts signed on July 4.
The policy mix has had immediate and complex effects. On one hand, tariffs have reduced imports, giving a statistical boost to GDP. On the other, they have increased uncertainty for businesses reliant on global supply chains and raised input costs for many manufacturers. Analysts note that consumer prices have faced upward pressure, though the inflationary impact has so far been more limited than some had feared. Still, the unpredictable pace of tariff announcements, suspensions, and revisions has created volatility that discourages long-term investment.
Heather Long, chief economist at Navy Federal Credit Union, emphasized that the job market’s resilience continues to underpin spending. “A stable labor force gives households confidence to keep buying, even with higher prices,” she said, while warning that slower growth is likely as tariffs ripple through the broader economy.
Looking ahead, forecasters expect GDP expansion to moderate in the second half of the year, settling closer to 1.5 percent. Much will depend on how trade policies evolve, the response of global markets, and whether businesses regain confidence to reinvest. With inflation pressures, global supply chain shifts, and rising borrowing costs, the U.S. economy faces both opportunities for domestic re-industrialization and risks of weaker household demand.