US economy grew more than expected as Trump’s tariffs took hold

The latest data released by the federal government shows that the U.S. economy has expanded more than expected, despite the implementation of President Donald Trump’s tariffs in recent months. The Gross Domestic Product (GDP) grew at a 3% annualized rate in the three months ending in June, a significant improvement from the -0.5% contraction in the first quarter of 2025.

This robust economic growth has been driven by an increase in consumer spending, according to the U.S. Commerce Department. However, the impact of Trump’s tariffs on the GDP figures has been somewhat obscured. The GDP formula subtracts imports to exclude foreign production from the calculation, leading to fluctuations in the readings.

The first quarter saw a decrease in GDP due to a surge in imports as businesses stockpiled inventory to mitigate the effects of tariffs. Conversely, a drop in imports in the second quarter may have inflated the GDP figure. The recent growth primarily reflects a decrease in imports, which are deducted from the GDP calculation.

Despite concerns about a tariff-induced downturn, the U.S. economy has so far defied expectations. The unemployment rate remains low, job growth is still strong, and inflation, while slightly increasing, is below levels seen at the beginning of Trump’s presidency. Consumer sentiment has improved in recent months as some tariffs have been rolled back, leading to resilient consumer spending.

The release of the GDP data comes just before the Federal Reserve’s decision on interest rates. Market sentiment indicates that the majority of investors expect rates to remain unchanged. The solid economic growth could reduce pressure on the Fed to lower interest rates, as consumers and businesses continue to borrow despite high costs. However, if growth begins to slow, the Fed may consider rate cuts to stimulate the economy.

Fed Chair Jerome Powell has emphasized that despite uncertainties, the economy remains in a strong position. The Fed will continue to monitor the impact of tariffs on economic performance before making any further decisions on interest rates.