President Donald Trump’s self-image has long been wrapped up in “winning” – be it TV ratings, business, politics, or on the world stage.
On Wednesday, he got news that fit the narrative: strong economic growth numbers for the second quarter of 2025, coming in at an annual rate of 3%. In President Trump’s telling, it put the lie to all the naysayers who predicted tariffs would do damage to the economy, spark inflation, and harm the Americans who can least afford it.
“Economic Growth Shatters Expectations as President Trump Fuels America’s Golden Age,” trumpeted a White House press release.
Why We Wrote This
The president has recently touted a trade deal with the EU, strong second-quarter growth, and a new stream of tariff revenue coming into the U.S. Treasury. But the overall economic outlook is uncertain.
The real story is much more complicated, economists say. It’s too early to see tangible impacts from the 10% across-the-board tariffs on U.S. imports that went into effect in early April. Steeper tariffs on other countries and products are just getting started. All the shifts in rates and deadlines have injected uncertainty into industries and businesses, making planning difficult.
Still, the president has had some undeniable wins in tariff negotiations. On Wednesday, Mr. Trump announced a trade deal with South Korea that would impose a 15% tariff on South Korean goods beginning Friday, down from the 25% he had threatened. That follows his agreement with the European Union over the weekend, which he pulled off without retaliation. The Europeans’ interest in keeping the U.S. on board in helping Ukraine militarily is seen as a key factor. Both South Korea and the EU also agreed to invest hundreds of billions in the U.S.
The president said he’s still negotiating with India, after announcing he would charge a 25% tariff on Indian goods starting Friday, as well as penalties for purchases from Russia. Negotiations are also ongoing with other key countries, including China, Mexico, and Canada.
At the same time, the Trump administration has been touting the new revenue that is coming into the U.S. Treasury from tariffs.
Earlier this month, Treasury Secretary Scott Bessent told a Cabinet meeting that $100 billion has come into the Treasury so far this year, a number that could rise to $300 billion by the end of the year. Mr. Trump has floated the idea of issuing rebate checks to Americans, in addition to paying down the debt.
In some ways, the mere fact that the U.S. economy hasn’t cratered after all the dire predictions over tariffs has given the president an opening to claim success – and to argue the “experts” were wrong again.
Magnus Lejhall/TT News Agency/Reuters
Many of those experts, however, suggest the economic picture is more mixed. Harvard economist Jason Furman says the just-released second-quarter growth number must be seen in a larger context – which significantly tempers the good news. In the first quarter of 2025, U.S. economic output contracted at a rate of 0.5%, followed by the 3% growth figure for the second quarter.
“The much better way to look at the data is averaging the two [quarters] which is a 1.2% annual rate,” Mr. Furman writes on X. The economic growth rate for all of 2024 was 2.8%, according to the U.S. Bureau of Economic Analysis, so this would represent a slowdown.
Perhaps more concerning is that consumer spending softened in the first half of 2025, compared with 2024. Still, the numbers are trending in the right direction: Second-quarter 2025 spending rose by 1.4%, after rising by just 0.5% in the first quarter.
One point that has surprised University of Chicago economist Steven Durlauf is how the stock market has recovered, after nose-diving in April when Mr. Trump announced his tariff plan. A reason for the rebound, he suggests, is that the tariffs are “substantially lower than were threatened.”
The stock market is one of many metrics Mr. Trump takes personally. Throughout his life, the president has been all about the appearance of success, touting his achievements and spinning mixed or bad news in the best possible light. The second-quarter gross domestic product number was cause for an all-caps celebration on his social media site: “2Q GDP JUST OUT: 3%, WAY BETTER THAN EXPECTED! “Too Late” MUST NOW LOWER THE RATE. No Inflation! Let people buy, and refinance, their homes!”
Julia Demaree Nikhinson/AP
“Too Late” is the president’s nickname for Federal Reserve Chair Jerome Powell, toward whom Mr. Trump has expressed persistent frustration over the Fed’s unwillingness to lower interest rates below the 4.25%-4.5% range. As expected, the central bank announced Wednesday afternoon that the benchmark rate would remain unchanged, though two governors dissented. Both are Trump appointees who agreed with the president that monetary policy is too tight. Inflation remains above the Fed’s target of 2%.
If nothing else, Mr. Trump’s constant drumbeat against Mr. Powell has set up the Fed chair as a fall guy if the economy sours. Speculation over whether the president might try to fire Mr. Powell has subsided, as the chair’s term draws to a close next spring.
Many unknowns remain about the new tariff regime that is being established – particularly how much of the cost, effectively a tax, will be paid by consumers. It’s possible some foreign producers will choose to foot at least a portion of the bill themselves. But if inflation rises noticeably, that may be devastating to Republicans trying to keep their House and Senate majorities in next year’s midterm elections.
Consumers are likely to experience disruptions in supply chains and higher prices, says Robert Lawrence, a professor of international trade and investment at the Harvard Kennedy School. But those price hikes may not come as a sudden shock.
“The increase in prices could actually be quite protracted, over six months to a year,” Professor Lawrence says. “It will be different stories in different industries. It won’t be a big bang. It will be like you’re a frog in boiling water.”
