Trump’s economy off to a slow start

Last week, the Bureau of Economic Analysis released its estimates of the performance of the US economy in the second quarter. The headline result was 3 percent annualized growth from the first quarter of the year. Three percent is a very healthy growth rate, and President Trump heralded the number as a signal that “America’s Golden Age” is upon us.

Hidden beneath that headline number, though, are strong signs of a slowing economy. Back in the first quarter, the economy shrank slightly, largely due to President Trump’s trade wars. As Trump threatened historic tariffs, corporations frontloaded their imports in Q1, pulling them forward from later in the year when tariffs were expected to be higher.

This produced the appearance that the economy shrank by 0.5 percent, even though other parts of the economy did fine. What some refer to as “core GDP,” which removes the more volatile components, grew at a 1.5 percent rate in the first quarter.

Because companies stockpiled inventories in Q1, they imported less in Q2, producing the opposite effect on GDP as in Q1—the growth rate was artificially inflated. In Q2, core GDP growth was only 1.1 percent. Thus, the import effect created the illusion of economic acceleration, even though it’s slowing.

Given the major changes to trade policy interfering with quarterly numbers, the better approach is to estimate growth so far this year, which will smooth out the quarter-to-quarter volatility. Looking at 2025 as a whole, however, it becomes clear that the Trump economy is lagging behind the 2024 Biden economy.

So far in 2025, the economy is growing at a 1.2 percent rate, much lower than the 3 percent reported in the second quarter. That’s less than half the growth rate in 2024. To be clear, 1.2 percent is the rate for the full year if the first-half trend continues.

While some may argue that the topline number is evidence of a booming economy, when you dig into the details and account for upheaval in international trade, the story shifts significantly. Looking ahead, President Trump’s other policies, such as the significant deregulatory efforts, and also the One Big Beautiful Bill might bear fruit and reverse that trend, but this week’s numbers are nothing to celebrate.