US economy grows 3.3% in second quarter

The US economy rebounded this spring from a first-quarter downturn due to fallout from President Donald Trump’s trade wars.

In an upgrade from its first estimate in July, the Commerce Department said on Thursday that US gross domestic product - the nation’s output of goods and services - expanded at a 3.3% annual pace from April through June after shrinking 0.5% in the first three months of 2025. The department had initially estimated second-quarter growth at 3%.

The first-quarter GDP drop, the first retreat of the US economy in three years, was mainly caused by a surge in imports - which are subtracted from GDP - as businesses scrambled to bring in foreign goods ahead of Trump’s tariffs. That trend reversed as expected in the second quarter: Imports fell at a 29.8% pace, boosting April-June growth by more than 5 percentage points.

The Commerce Department reported that consumer spending and private investment were a bit stronger in the second quarter than it had first estimated.

Consumer spending, which accounts for about 70% of GDP, grew at a 1.6% annual pace, lackluster but better than 0.5% in the first quarter and the 1.4% the government initially estimated for the second.

Even with an upward revision, private investment dropped at a 13.8% annual pace from April through June. That would be biggest drop since the second quarter of 2020 at the height of the coronavirus pandemic. A reduction in private inventories cut almost 3.3 percentage points off second-quarter GDP growth.

Spending and investment by the federal government fell at a 4.7% annual clip on top of a 4.6% drop in the first quarter.

A category within the GDP data that measures the economy’s underlying strength came in stronger than first reported, growing 1.9% from April-June, same as in the first quarter. This category includes consumer spending and private investment, but excludes volatile items like exports, inventories and government spending.

Since returning to the White House, Trump has overturned decades of US policy that had favored freer trade. He’s slapped double-digit taxes on imports from almost every country on earth and targeted specific products for tariffs, too, including steel, aluminium and autos.

Trump sees tariffs as a way to protect American industry, lure factories back to the United States and to help pay for the massive tax cuts he signed into law July 4.

But mainstream economists - viewed with disdain by Trump and his advisers - say that his tariffs will damage the economy, raising costs and making protected US companies less efficient. They note that tariffs are paid by importers in the United States, who try to pass along the cost to their customers via higher prices. Therefore, tariffs can be inflationary - though their impact so far has been modest.

The erratic way Trump has imposed the tariffs - announcing and suspending them, then coming up with new ones - has left businesses bewildered and uncertain about investments and hiring.

Heather Long, chief economist at Navy Federal Credit Union, said the resilience of the job market - the government also reported Thursday that fewer people applied last week for unemployment benefits - is “giving people confidence to open their wallets for the basics and some little splurges.’’ But she expected the economy to stay in a ”slower speed mode with spending and growth around 1.5% as the tariffs become more visible to American consumers.”

Meanwhile, stocks held relatively steady near their record highs as investors pored over a mixed batch of earnings reports from big US companies.

The S&P 500 was up 0.2% in early trading Thursday, adding to the all-time high it set a day earlier. The Dow Jones Industrial Average was little changed, and the Nasdaq composite was up 0.3%. Spam maker Hormel fell sharply after reporting earnings that fell short of Wall Street’s forecasts and cutting its outlook for the year. Treasury yields were flat in the bond market following some mixed reports on the economy. European and Asian markets were mixed.

World shares were mixed Thursday after modest gains on Wall Street lifted the S&P 500 to another all-time high ahead of computer chipmaker Nvidia’s highly anticipated earnings report.

The future for S&P 500 rose 0.1% while that for the Dow Jones Industrial Average added 0.3%. Meanwhile, oil prices declined.

In early European trading, Germany’s DAX climbed 0.4% to 24,144.65 while Britain’s FTSE 100 slipped 0.2% to 9,240.75. In Paris, the CAC 40 jumped 1.1% to 7,825.28.

Agencies