3% GDP for Q2 is actually a show of weakness

We got our first look at how the overall US economy did from April to June with the release of GDP for Q2 2025 on Wednesday. And with Trump/GOP struggling, they were desperate to hang their hats on any good news.

Retweeted Joe Weisenthal: Q2 GDP surges to record 3.0%, crushing expectations! The Trump economy is on fire, delivering big wins for the American worker! 🇺🇸

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— 🇺🇦 Senate Republicans (mirror) (@senategop.govpeeps.us) July 30, 2025 at 12:13 PM

Oh, well I guess all those worries about tariffs and a Trump Slump are over?

Far from it, and the reaction to Tariff Man's trade decisions are a big reason behind that "growth".

Nothing confusing here... Q2 GDP @ 3.0%

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— Mike Madowitz (@mikemadowitz.bsky.social) July 30, 2025 at 7:32 AM

That huge increase from imports is due to fewer imports, not any underlying growth in activity. And we got another indication of that earlier in the week, with a shrinking trade deficit in goods for June. And not for the "good reason", but instead it is due to imports going down more than exports did.

The international trade deficit was $86.0 billion in June, down $10.4 billion from $96.4 billion in May. Exports of goods for June were $178.2 billion, $1.1 billion less than May exports. Imports of goods for June were $264.2 billion, $11.5 billion less than May imports.

This means the decline in imported goods now matches the decline in exported goods that we’ve seen since April, with the trade deficit for goods back to where it was in the first month after President Trump’s new tariffs started to be in full effect.

As mentioned before, the shrinking trade deficit unwound the drag it caused on 1st Quarter GDP, and causing deceivingly higher numbers for Q2.

Net change to total GDP Q1 2025
Trade -4.61%
Inventories +2.59%

Q2 2025
Trade +4.99%
Inventories -3.17%

A better way to evaluate true economic growth can be to take out trade, inventories and government spending, to see what’s going on at the basic levels of the economy. If you do that, there is weakening in both Q1 and Q2 from where we were at the end of 2024, and for the last 2 years of the Biden Admin in general.

So don’t get fooled by any Trump/GOP attempts to promote this 2nd Quarter growth number. Know that it is all due to lower amounts of trade both coming and going as a result of Tariff Man’s moves, and that domestic GDP growth is actually stalling out at the halfway mark of 2025. This 3% growth isn't anything close to the 3% growth we had in the middle of 2024, and I strongly suspect we won't see a repeat of it in Q3 2025, or anything close to that figure.