Trump Raises a Toast for 3% GDP Growth in the U.S., but the Devil is in the Details
When growth stems from a collapse in imports rather than real demand, I believe this report serves more as a warning than as good news.
(Background: Powell insists on no interest rate cuts! However, divisions have emerged within the Federal Reserve, Bitcoin rebounds after falling below $116,000, and Ethereum regains $3,800)
(Context: The probability of a rate cut in July approaches zero! U.S. non-farm employment data for June is exceptionally strong, the stock market rises, and Bitcoin surpasses $110,000)
The U.S. Department of Commerce announced last night (30) that the GDP growth rate for the second quarter reached 3%, an unexpectedly strong number that seemed like a shot of adrenaline, temporarily silencing concerns about an economic recession. President Trump immediately declared victory on social media, claiming this proves that his tariff policy has not only not harmed the economy but has made it “unprecedentedly strong.”
However, while everyone’s attention is drawn to the shining 3% in the spotlight, the truth is that this seemingly robust GDP report is not a sign of economic health but rather a warning of deeper issues. The growth did not come from genuine demand and prosperity, but rather from unusual statistical illusions caused by the trade war.
Unraveling the Statistical Illusions of GDP
To understand this illusion, we need to return to the basics of economics and look at the fundamental formula for GDP:
GDP = Consumption (C) + Investment (I) + Government Spending (G) + (Exports (X) – Imports (M)).
Most of the time, we focus on the components C, I, and G, which represent domestic economic momentum. However, in this case, the real “devil” lies in the parentheses – M (subtracting imports).
Data shows that U.S. imports plummeted by 30.3% in the second quarter. In the calculation of GDP, imports are a negative contribution, so the sharp decrease in imports will directly “boost” the final GDP figure. In fact, according to deeper analysis, net exports (exports minus imports) contributed an astonishing 5 percentage points to this quarter’s GDP growth.
In other words, without the catastrophic drop in imports, this GDP data would likely look very bleak.
The Silent Protest of Consumption and Investment
Now, let’s think like economists: Should a strong economy see an increase or decrease in imports? The answer is obvious. When consumers have money to spend and businesses are confident to expand, they will purchase more foreign goods and raw materials, leading to an expected rise in imports.
The sharp decline in imports is usually not good news; it often points to a troubling conclusion: domestic demand is shrinking.
So, what caused this epic decline in imports? It is not a natural market reaction; it is clearly the result of the “overdraft effect” triggered by tariff policies. Looking back at the first quarter, under the shadow of tariff threats, U.S. companies frantically stockpiled imported goods, leading to a 37.9% surge in imports, which dragged down first-quarter GDP performance.
The second quarter’s crash is a correction of the first quarter’s “premature consumption.” With warehouses full of goods, companies naturally halted new purchases. It’s like a person running a marathon, sprinting too hard in the first kilometer, only to be left exhausted in the next. You cannot just look at their relative speed while they are walking slowly and claim they are in better shape.
Thus, this “economic growth” driven by the “collapse of imports” is essentially a one-time data distortion; it is not sustainable and instead exposes the severe disruption of normal business cycles caused by the trade war.
Stalled Domestic Demand: When Consumers and Investors Choose to Lie Flat
If the trade data is the “smoke and mirrors” of this report, then what do we see at the core of the economy, the true demand within the U.S.? The answer is: fatigue.
Data does not lie. Let’s look at those core indicators that truly reflect economic health:
First, consumer spending, which occupies half of the U.S. economy, grew by only 1.4% in the second quarter. While better than the first quarter, in a so-called strong economy, this number can only be described as “mediocre.” This tells us that despite a seemingly solid job market, American households remain quite cautious about spending.
Next, let’s examine the investment confidence of businesses and individuals. Residential investment, which pertains to the real estate market, has been declining for multiple consecutive quarters, shrinking again by 4.6% this quarter. This aligns with President Trump’s complaints that high interest rates are hindering the housing market, also indirectly confirming that the public’s expectations for future economic conditions are not optimistic. There is also a lack of highlights in business fixed asset investment.
Finally, economists also place great importance on the “final sales to private domestic purchasers.” This indicator excludes government spending, inventory changes, and chaotic trade data, regarded as the purest thermometer for measuring domestic potential demand. This figure grew only 1.2% in the second quarter, not only lower than the first quarter’s 1.9% but also setting a new low in recent years.
After filtering out all disturbances and noise, we can see that the true pulse of the U.S. economy is likely not a vigorous 3% but rather a gradual faltering.
Why We Should Be Wary of Optimism That Only Looks at Headlines
Of course, there are always optimistic voices in the market. Some analysts attribute this performance to the “resilience” of the U.S. economy. They believe that even against the backdrop of global trade disputes, the U.S. economy can still deliver better-than-expected results, which itself is a testament to strength.
This argument sounds reasonable but does not hold up under scrutiny. It’s like praising an athlete who finished a race on painkillers for their resilience, ignoring the more severe injuries they may face once the medication wears off.
This “resilience” is precisely built on an extremely fragile and unsustainable foundation. It does not stem from breakthroughs in innovation or improvements in productivity, but rather from the destruction and distortion of trade rules. Business decisions are no longer based on long-term market supply and demand but have turned into short-term gambles on the next round of tariff policies. This growth driven by uncertainty is eroding the foundation of the market and suppressing truly beneficial long-term investments in the economy.
What’s more concerning is that this misinterpretation of “resilience” could lead policymakers to make errors in judgment. When everyone is cheering for the headline number of 3%, they may overlook the 1.2% slowdown in real demand lurking beneath the surface. This could place greater political pressure on the Federal Reserve (FED) when formulating monetary policy and may lead the government to selectively ignore the real costs of its trade policies.
Searching for the True Heartbeat of the Economy Amidst the Noise
So, returning to the initial question: how should we view this GDP report?
My suggestion is to regard it as a potential warning rather than good news. It clearly demonstrates how a single overall economic figure can be easily distorted by policy and used to serve specific political narratives in today’s era.
The reaction of President Trump is particularly ironic. On one hand, he holds up the 3% figure as a badge of success for his policies, claiming the economy is thriving; on the other hand, he urgently calls on the Federal Reserve to “must cut interest rates” to stimulate the economy. This contradictory rhetoric exposes his deep-seated anxiety about the true state of the economy.
When data becomes a political weapon, and noise drowns out the signal, all we can do is remain vigilant, return to common sense, and seek out those most basic and core indicators: Are consumers’ wallets full or empty? Are businesses willing to invest in the future or stockpiling goods in anticipation of uncertainties? Are people willing to take out loans to buy houses or choosing to hold cash and wait?
The answers to these questions tell us far more about the real temperature and heartbeat of the economy than any “carefully made-up” GDP number. At this moment, the heartbeat I hear is not as strong and vigorous as the White House claims.
Related Reports
U.S. April CPI hits a four-year low》Fed rate cut probability rises, Bitcoin approaches $105,000, U.S. stocks up.
Trump’s tariffs may delay Fed rate cuts! Federal Reserve officials: If inflation improves, rates could drop significantly in the next 12-18 months.
Breaking News》Bitcoin breaks through $100,000! Trump criticizes the Fed for ### “not cutting rates.”