In the first few months of the year, as Trump began announcing border duties and the world awaited his so-called \u201cLiberation Day\u201d on April 2, America\u2019s imports surged, with businesses and consumers rushing to beat the tariffs.<\/p>\n
Imports negatively affect GDP calculations. As such, GDP contracted by 0.5 per cent. In the most recent quarter, imports fell, and GDP returned to 3 per cent \u2013 the same strong growth figures the US posted in the middle of last year, under president Joe Biden. Contrary to Trump\u2019s claims, he did not inherit an economic mess from his predecessor, but one of the fastest-growing developed economies in the world post-COVID-19 pandemic.<\/p>\n
Federal Reserve chairman Jerome Powell said it was better to focus on the combined growth figures for the first half of the year, to smooth out the volatility, which showed GDP rose at 1.2 per cent \u2013 down from an average 2.5 per cent last year.<\/p>\n
\u201cThe moderation in growth largely reflects a slowdown in consumer spending,\u201d he said on Wednesday.<\/p>\n
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A pedestrian carries a Macy\u2019s Inc. shopping bag in New York on Tuesday.Credit: Bloomberg<\/p>\n
Business investment in equipment and intangibles was broadly up, he said, while activity in the housing sector remained weak. But generally speaking, the economy was solid, though inflation was still \u201csomewhat elevated\u201d.<\/p>\n
\u201cIt seems to me, and to almost the whole committee, that the economy is not performing as though restrictive policy is holding it back inappropriately,\u201d Powell said, explaining the bank\u2019s decision to leave interest rates on hold<\/a> at 4.25 to 4.5 per cent \u2013 despite Trump\u2019s intense pressure to cut.<\/p>\n Consumer spending rose 1.4 per cent for the quarter, up from 0.5 per cent, even as Trump\u2019s new tariffs are raking in tens of billions of dollars in new tax revenue, and amid significant uncertainty about who is footing the bill and how much more there is to come.<\/p>\n \u2018We\u2019re going to look back and either say, \u201cWow, the economy was super resilient\u201d \u2026 or we\u2019re going to say, \u201cYeah, you could kind of feel it was weakening\u201d.\u2019<\/p>\n Louise Sheiner, Brookings Institution<\/p>\n And consumer sentiment, measured by the long-running University of Michigan survey, has bounced back into the 60s from just above 50 points.<\/p>\n (A major asterisk to the good news, however, was a weak employment report released on Friday in the US, which found the country added only 73,000 jobs in July, and significantly revised down the figures for previous months.)<\/p>\n While tariffs have been in place for months and raised tens of billions of additional dollars for US government coffers, the new tariffs<\/a>, which go into effect in a week, represent the first time since Trump came to power that there has been the semblance of certainty over what the rates will be \u2013 at least for now.<\/p>\n Still, the US economy seems to be more robust than the doomsday predictions considered.<\/p>\n So, do the world\u2019s economists owe Trump an apology?<\/p>\n Maurice Obstfeld, of the Peterson Institute for International Economics, says it is too soon to decide.<\/p>\n \u201cThese behavioural shifts have made GDP data more volatile than usual,\u201d he says. \u201cLet\u2019s wait for the tariffs to settle down at new, predictable levels and see what happens before we shoot the economists.\u201d<\/p>\n Louise Sheiner, an economist at the Brookings Institution, espoused a similar view to The New York Times: \u201cWe\u2019re going to look back and either say, \u2018Wow, the economy was super resilient and these things didn\u2019t matter as much as we thought they would\u2019, or we\u2019re going to say, \u2018Yeah, you could kind of feel it was weakening\u2019.\u201d<\/p>\n Los Angeles\u2019 busy port suggests no slowdown in business.Credit: Bloomberg<\/p>\n Justin Wolfers, an Australian economics professor at the University of Michigan, and a regular critic of Trump\u2019s economic agenda, says there is still a decent chance of the US economy heading south later this year.<\/p>\n \u201cWhen I was asked in the first half of the year for a forecast of the chances of a recession, I was careful to give a conditional forecast: if they go for the \u2018Full Trump\u2019, then 75 per cent, and if they drop their nonsense, then 25 per cent,\u201d he says.<\/p>\n Loading<\/p>\n \u201cAs it happened, he started with the Full Trump, then TACO\u2019d. So perhaps the correct probability is somewhere between 25 and 75 per cent, and probably something like 40 per cent. That still seems right to me.\u201d<\/p>\n The term TACO stands for Trump Always Chickens Out \u2013 a popular critique of the president\u2019s tendency to make scary announcements, before backtracking or reverting to the norm.<\/p>\n \u201cThe idea that a single quarterly reading on a single measure says anything about [the economy being a] miracle or mirage is silly on its face,\u201d Wolfers says.<\/p>\n \u201cThe economy isn\u2019t as bad as folks forecast, but neither was the actual policy that the White House was telling us we should expect.\u201d<\/p>\n In moments of candour, the Trump administration acknowledges American consumers might pay higher prices for some goods, but it is convinced that economic growth will compensate.<\/p>\n Hassett said as much this week, noting real wages had grown, which \u201cmeans people have more money in their pockets than the price increases that they\u2019ve seen\u201d.<\/p>\n Board appointees break ranks<\/p>\n![\"Los](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/08\/105a1580590bd682eee0d92fe6dd4758260d818a.jpeg\")
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