U.S. economy rebounds in Q2 after contracting in Q1
- Alexangel Ventura
- Jul 30
- 2 min read
The United States economy according to new data released today has rebounded in the second fiscal quarter, reversing previous economic contractions in Q1 and lessening recession fears.
According to the Bureau of Economic Analysis's latest advanced estimate, the U.S. economy is projected to grow at a rate of 3.0 percent annually as of the second quarter of 2025, including the months of April, May, and June. The increase in the gross domestic product (GDP) in quarter 2, according to the BEA, was due to "decrease in imports, which are a subtraction in the calculation of GDP, and an increase in consumer spending" which were partially offset by a downturn in investment (likely due to investors' skepticism of investing in a high-volatility market like now).
This data serves a heavy contradiction to the Q1 fiscal period's economic outcome, which showed the first American economic contraction in three years. At the time, investors saw the economic downturn as a result of the implementation of tariff "Liberation Day" policies which forced many companies to pursue mass layoffs and preemptive price hikes. However, these Q2 results have shown otherwise, proving that despite tariffs, the economy has remained strong generally.
However, the data report from the BEA is not perfect for the economy. Real final sales to private domestic purchasers, the sum of both consumer spending and gross private fixed investment, slowed down in Q2 from Q1, showing a slump in sales for many businesses nationally. Also, both the price index for gross domestic purchases as well as the personal consumption expenditures (PCE) price index, although both slowing from Q1, still achieved moderate rises, meaning that prices are still going up for many consumers.
During the second fiscal quarter, the Trump administration cooled down tariff threats by pursuing open trade negotiations with other countries to bring down tariffs on both sides, most consequentially the ongoing U.S.-China talks. During and after Q2, Trump was able to reach trade deals with the European Union, Japan, and other trading partners with the exception of China, which has yet to agree to a deal.
However, while the economy as a whole is trending upwards, tariffs continue to play an adverse role on the profitability of smaller businesses as well as consumers who are less adaptable to the current volatile economic environment as the larger companies. According to a Kikoff survey, the vast majority of Americans feel "strapped for cash" despite positive economic discussion in the media and in the government. In addition, data from as early as in April showed that 42% of small businesses reported rising costs due to tariffs. Keep in mind that during that time, nowhere near as many tariffs were implemented as now.
