Let's break down the GDP numbers to see what had happened.
GDP growth = G + I + C + NE
Q2 GDP (1st estimate) = 0.08 + (-3.09) + 0.98 + 4.99 = 2.96 (3)
Q2 GDP (2nd estimate) = (-0.03) + (-2.7) + 1.07 + 4.95 = 3.29 (3.3)
From the comparison between the 2 estimates, we can see that both the government spending (G) and Investment (I) are negative. The biggest contributor to the GDP forecast is net export (NE) and this means that the US export exceeds import by a big margin. What is happening here? Trump has been forcing other countries to buy US goods and restricting imports by imposing high tariffs. Consequently, the decline in US import is causing the investment (I) to be negative.
However, there is only a marginal change in consumption (C) and this means the US consumers are still holding back their spendings. In a nutshell, Trump has distorted the US GDP.
Last but not least, we can see that the core PCE remains at 2.5% in Q2 2025 which means the US inflation is no longer trending down.
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