Economy
US economy expands 3% in Q2, but rebound masks weaknesses
The U.S. economy expanded at a surprising 3% annual pace from April through June, bouncing back at least temporarily from a first-quarter drop that reflected disruptions from President Donald Trump’s trade wars.
The rebound grossly overstated the economy’s health as subsiding imports accounted for the bulk of the improvement and domestic demand increased moderately.
Gross domestic product (GDP) bounced back after falling at a 0.5% clip from January through March, the Commerce Department’s Bureau of Economic Analysis said in its advance estimate on Wednesday.
The first-quarter drop was mainly caused by a surge in imports as businesses scrambled to bring in foreign goods ahead of Trump’s tariffs.
Economists had expected 2% growth in the second quarter.
From April through June, a drop in imports added more than 5 percentage points to growth. Consumer spending came in at a weak 1.4%, though it was an improvement over the first quarter.
Economists say Trump’s protectionist trade policy, including sweeping tariffs on imports as well as delaying higher duties, has made it difficult to get a clear pulse on the economy.
Economists urged focusing on final sales to private domestic purchasers, viewed by economists and policymakers alike as a barometer of underlying U.S. economic growth. This measure grew at a 1.2% rate after advancing at a 1.9% rate in the first quarter. That was the slowest increase in domestic demand since the fourth quarter of 2022.
A rush to beat the duties in the first quarter resulted in a record goods trade deficit that weighed on the economy and led to the largest drag on GDP growth from net exports on record, analysts at Goldman Sachs noted recently.
That trend reversed last quarter.
“The increase in real GDP in the second quarter primarily reflected a decrease in imports, which are a subtraction in the calculation of GDP,” said the Commerce Department. The uptick also reflected an increase in consumer spending, the report said.
Acceleration not sustainable
Analysts widely expected a bounce back as imports cooled, but said this might not be sustainable.
They warned that Trump’s incoming wave of tariff hikes could cause an uptick in inflation, which would in turn erode households’ spending power. This stands to weigh on consumption patterns.
“It’s very much distorted by the trade flows and inventory,” said Nationwide chief economist Kathy Bostjancic of second-quarter growth.
But the acceleration is not sustainable, Bostjancic noted.
Since returning to the U.S. presidency, Trump has threatened and rolled out wave after wave of fresh duties.
These included a 10% levy on almost all U.S. partners, higher duties on steel, aluminum and auto imports, as well as separate actions against Canada and Mexico over illegal immigration and illicit fentanyl flows.
In April, the Trump administration separately took aim at the world’s number two economy, China, as Beijing pushed back on U.S. tariffs.
Both countries ended up imposing tit-for-tat tariffs on each other’s products, reaching triple-digit levels and bringing many trade flows to a halt before they reached a temporary agreement to lower duties.
After two days of talks in the Swedish capital of Stockholm this week, negotiators signaled there could be an extension of the truce – although the final call depends on Trump.
Economists anticipated lackluster economic growth in the second half.
Though the White House has announced a number of trade deals, economists said the nation’s effective tariff rate remained one of the highest since the 1930s and noted that about 60% of the nation’s imports remained uncovered by an agreement.
Economists expect the Federal Reserve (Fed) will keep its benchmark interest rate in the 4.25%-4.50% range after the end of a two-day policy meeting on Wednesday, resisting pressure from Trump to lower borrowing costs. The Fed cut rates three times in 2024, with the last move coming in December.
Trump ramped up pressure following the data, saying on social media that Fed Chair Jerome Powell “must now lower the rate,” using his critical nickname for the central bank chief in doing so.
‘Clear deceleration’
Bostjancic expects that underlying activity driving U.S. growth will be moderating, although not collapsing.
“The U.S. economy continues to navigate a complex set of crosscurrents, obscuring a clear reading of its underlying momentum,” said EY chief economist Gregory Daco in a note ahead of the GDP report.
But he added that one trend is evident, which is that “economic activity is decelerating even as inflationary pressures are reemerging.”
“Tariff-induced cost pressures, persistent policy uncertainty, severely curtailed immigration, and elevated interest rates are collectively dampening employment, business investment and household consumption,” Daco said.
Analysts are closely eyeing the impact of Trump’s tariffs on inflation, with economists warning that the duties could fuel price increases. They expect to learn more from data in the summer months.
All of this could impact consumer spending – a key economic driver.
“The trend in GDP growth is best analyzed by considering the first and second quarters together,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
He said in an earlier note that the U.S. economy would probably “lose more momentum” in the third quarter, when consumer prices for imported goods likely will rise sharply.
Türkiye’s trade deficit shrank 12.1% year-on-year in July, Trade Minister Ömer Bolat announced Saturday.
Bolat said exports rose to $25 billion in July, while imports stood at $31.4 billion. He made the comments during a press conference in Samsun.
“The decline in foreign trade deficit was thanks to a strong export performance and controlled import growth,” he said.
In the January-July period of 2025, exports for the first seven months reached $156 billion, while exports for the last 12 months rose to $269.5 billion.
According to Türkiye Exporters’ Assembly (TIM) President Mustafa Gültepe, the $2.5 billion increase in July exports was due to parity in automotive and chemical sectors.
“We are certainly not complaining,” Gültepe said. “But for stable and sustainable growth, we need to bring all sectors into the game.”
July marked Türkiye’s highest monthly export value on record, climbing 11% compared with the same month last year. Service exports are estimated to have reached $11.8 billion.
Automotive led the way with $3.8 billion in exports, followed by chemicals ($3.4 billion), ready-made clothing ($1.58 billion), electrical and electronics ($1.57 billion), and steel ($1.4 billion).
Seventeen sectors posted export growth, while nine saw declines. The top exporting provinces were Istanbul, Kocaeli, Ankara, Bursa, and Izmir, with Ankara, Bolu, Çankırı, Edirne, and Muğla hitting record monthly figures. In July, 1,180 companies exported for the first time.
Türkiye’s main export destinations were Germany, the U.K., the U.S., the UAE, and Italy. Exports to 52 countries rose more than 50%, while 107 countries saw growth above 10%. Overall, exports increased to 137 countries.
Gültepe welcomed the Central Bank’s recent 300 basis point interest rate cut, describing it as a “positive step” toward boosting competitiveness. He also praised the extension of the 3% foreign exchange conversion support.
Focus on U.S. market
On U.S.-Türkiye trade, Gültepe criticized Washington’s decision to raise additional tariffs on Turkish goods from 10% to 15%, calling it “unfortunate.” However, he said TİM remains focused on increasing its share in the U.S. market.
“If we can return to the competitiveness of 2–3 years ago, we can turn our partial advantage into an opportunity,” he said, stressing the need for persistent trade diplomacy with the U.S.
President Donald Trump on Friday fired the chief of the agency responsible for monthly jobs reports after data showed weaker-than-expected hiring in July and major downward revisions for May and June.
Trump, in a post on his social media platform, alleged that the figures were manipulated for political reasons and said that Erika McEntarfer, the director of the Bureau of Labor Statistics, who was appointed by former President Joe Biden, should be fired. He provided no evidence for the charge.
“I have directed my Team to fire this Biden Political Appointee, IMMEDIATELY,” Trump said on Truth Social. “She will be replaced with someone much more competent and qualified.”
After his post, Labor Secretary Lori Chavez-DeRemer said on X that McEntarfer was no longer leading the bureau and that William Wiatrowski, the deputy commissioner, would serve as the acting director.
“I support the President’s decision to replace Biden’s Commissioner and ensure the American People can trust the important and influential data coming from BLS,” Chavez-DeRemer said.
Friday’s jobs report showed that just 73,000 jobs were added last month and that 258,000 fewer jobs were created in May and June than previously estimated.
McEntarfer was nominated by Biden in 2023 and became the Commissioner of the Bureau of Labor Statistics in January 2024. Commissioners typically serve four-year terms but since they are political appointees can be fired. The commissioner is the only political appointee of the agency, which has hundreds of career civil servants.
Trump focused much of his ire on the revisions the agency made to previous hiring data. Job gains in May were revised down to just 19,000 from 125,000, and for June they were cut to 14,000 from 147,000. In July, only 73,000 positions were added. The unemployment rate ticked up to a still-low 4.2% from 4.1%.
“No one can be that wrong? We need accurate Jobs Numbers,” Trump wrote. “She will be replaced with someone much more competent and qualified. Important numbers like this must be fair and accurate, they can’t be manipulated for political purposes.”
The monthly employment report is one of the most closely-watched pieces of government economic data and can cause sharp swings in financial markets. The disappointing figure sent U.S. market indexes about 1.5% lower Friday.
While the jobs numbers are often the subject of political spin, economists and Wall Street investors – with millions of dollars at stake – have always accepted U.S. government economic data as free from political manipulation.
Türkiye said on Friday it was still among a few countries with relatively favorable trade terms after the U.S. issued a new set of tariffs that will apply to dozens of countries and that include higher duties on Turkish imports.
Late Thursday, President Donald Trump signed an executive order imposing tariffs ranging from 10% to 41% on goods from dozens of trade partners as of Aug. 7. Rates were set at 25% for India’s U.S.-bound exports, 20% for Taiwan’s, 19% for Thailand’s and 15% for South Korea’s.
The White House said the tariff for products from Canada would rise to 35% from 25%, effective Friday. But Trump gave Mexico a 90-day reprieve from higher tariffs to negotiate a broader trade deal.
Under the new measures, tariffs on Turkish products were increased to 15%, compared to 10% that was announced by Trump as a baseline duty in April.
Despite that, Türkiye continues to “positively decouple” itself, the Trade Ministry said in a statement on Friday, highlighting that the country remains among the countries subject to the lowest customs duties.
The ministry said Türkiye’s position shows that it is regarded as “a balanced and constructive trade partner” by the U.S.
It suggested that Turkish exporters “retain their competitive edge” in global markets and that Türkiye’s “strong” position in international trade “remains intact.”
Compared to many Asian and Latin American countries, the ministry said, Türkiye’s lower tariff category represents a significant advantage.
Meanwhile, talks are ongoing between the two countries at diplomatic and technical levels, particularly regarding tariffs on strategic sectors such as steel, automotive and copper, the statement said.
Negotiations also aim to secure more favorable terms for Türkiye’s textile and apparel sectors, the ministry added.
“The priority is to ensure that trade with the U.S. proceeds in a predictable, fair, and sustainable framework,” the statement said, adding that Türkiye’s inclusion among countries with positive progress in negotiations demonstrates strengthening mutual dialogue and cooperation in bilateral trade relations.
U.S. job growth is cooling significantly as President Donald Trump’s unpredictable trade policies unsettle businesses and cloud the outlook for the world’s largest economy.
The Labor Department reported Friday that U.S. employers added just 73,000 jobs last month, well short of the 115,000 forecasters had expected.
Worse, revisions shaved a stunning 258,000 jobs off May and June payrolls. And the unemployment rate ticked up to 4.2% as Americans dropped out of the labor force and the ranks of the unemployed rose by 221,000.
“A notable deterioration in U.S. labor market conditions appears to be underway,” said Scott Anderson, chief U.S. economist at BMO Capital Markets. ”We have been forecasting this since the tariff and trade war erupted this spring and more restrictive immigration restrictions were put in place. Overall, this report highlights the risk of a harder landing for the labor market.”
Economists have been warning that the rift with every U.S. trading partner will begin to appear this summer and the Friday jobs report appeared to sound the bell.
“We’re finally in the eye of the hurricane,” said Daniel Zhao, chief economist at Glassdoor. “After months of warning signs, the July jobs report confirms that the slowdown isn’t just approaching-it’s here.”
U.S. markets recoiled and the jobs report and the Dow tumbled more than 600 points at the opening bell Friday.
The revelations in the new data raise questions about the health of the job market and the economy as President Donald Trump pushes forward with an unorthodox overhaul of American trade policy.
Trump has discarded decades of U.S. policy that had favored fewer barriers and ever-freer trade. Instead, Trump is imposing hefty import taxes – tariffs – on products from almost every country on earth. Trump believes the levies will bring manufacturing back to America and raise money to pay for the massive tax cuts he signed into law July 4.
Mainstream economists say the cost of the tariffs will be passed along to Americans, both businesses and households. That has already begun to happen.
Walmart, Procter & Gamble, Ford, Best Buy, Adidas, Nike, Mattel, Shein, Temu, Stanley Black & Decker, have all announced, or said that they would hike prices, due to U.S. tariffs.
Trump has also sowed uncertainty in the erratic way he’s rolled the tariffs out – announcing, then suspending them, then coming up with new ones. Overnight, Trump signed an executive order that set new tariffs on a wide swath of U.S. trading partners to that go into effect on Aug. 7., and that arrived after a flurry of unexpected tariff-related actions this week.
“There was a clear, significant, immediate, tariff effect on the labor market and employment growth essentially stalled, as we were dealing with so much uncertainty about the outlook for the economy and for tariffs,” said Blerina Uruci, chief U.S. economist for the brokerage T. Rowe Price.
Still, Uruci said the data suggests we could be past the worst, as hiring actually did pick up a bit in July from May and June’s revised and depressed levels.
“I’m not overly pessimistic on the U.S. economy based on this morning’s data,” she said, though she does think that hiring will remain muted in the coming months as the number of available workers remains limited due to reduced immigration and an aging population.
Trump has sold the tariffs hikes as a way to boost American manufacturing, but factories cut 11,000 jobs last month after shedding 15,000 in June and 11,000 in May. The federal government, where employment has been targeted by the Trump administration, lost 12,000 jobs. Jobs in administration and support fell by nearly 20,000.
Healthcare companies added 55,400 jobs last month – accounting for 76% of the jobs added in July and offering another sign that recent job gains have been narrowly concentrated.
The department originally reported that state and local governments had added 64,000 jobs in education in June. After the revisions released Friday, that number fell to below 10,000.
After the big revisions for May and June, Labor Department data show that the U.S. economy has generated an average of just 85,000 jobs a month this year, barely half last year’s average of 168,000 and well below an average 400,000 from 2021-2023 as the economy rebounded from COVID-19 lockups.
The weak jobs data makes it more likely that Trump will get one thing that he most fervently desires: A cut in short-term interest rates by the Federal Reserve, which often — though not always — can lead to lower rates for mortgages, car loans, and credit cards.
Fed Chair Jerome Powell and other Fed officials have repeatedly pointed to a healthy job market as a reason that they could take time to evaluate how Trump’s tariffs were affecting inflation and the broader economy. Now that assessment has been undercut and will put more pressure on the Fed to reduce borrowing costs.
Wall Street investors sharply raised their expectations for a rate cut at the Fed’s next meeting in September after the report was released.
On Wednesday, the Fed left its key rate unchanged for the fifth straight meeting and Powell signaled little urgency to reduce rates anytime soon. He said the “labor market is solid” with “historically low unemployment.” But he also acknowledged there is a “downside risk” to employment stemming from the slow pace of hiring that was evident even before Friday’s weaker numbers.
The current situation is a sharp reversal from the hiring boom of just three years ago when desperate employers were handing out signing bonuses and introducing perks such as Fridays off, fertility benefits and even pet insurance to recruit and keep workers.
The rate of people quitting their jobs – a sign they’re confident they can land something better – has fallen from the record heights of 2021 and 2022 and is now below where it stood before the pandemic.
Drees Homes, a homebuilder based outside Cincinnati in Fort Mitchell, Kentucky, has hired about 50 people over the past year, bringing its workforce to around 950. Pamela Rader, Drees’ vice president for human resources, it’s “gotten a little bit easier’’ to find workers.
A couple of years ago, Rader said jobseekers were focused on getting more pay. Now, she said, they emphasize a better work-life balance, stable employment and prospects for advancement.
U.S. President Donald Trump said on Friday the Federal Reserve (Fed) board should “assume control” if Fed Chair Jerome Powell continues to refuse to lower interest rates.
Posting on his Truth Social platform, Trump called Powell “stubborn.” The Fed chair has been subjected to vicious verbal attacks by the Republican president over several months.
“Jerome ‘Too Late’ Powell, a stubborn MORON, must substantially lower interest rates, NOW,” Trump said. “IF HE CONTINUES TO REFUSE, THE BOARD SHOULD ASSUME CONTROL, AND DO WHAT EVERYONE KNOWS HAS TO BE DONE!” he added.
The U.S. central bank held interest rates steady on Wednesday and Powell’s comments after the decision undercut confidence that borrowing costs would begin to fall in September, stoking the ire of Trump, who has demanded immediate and steep rate relief.
The Fed has the responsibility of stabilizing prices and maximizing employment. Powell has held its benchmark rate for overnight loans constant this year, saying that Fed officials needed to see what impact Trump’s massive tariffs had on inflation.
The latest policy decision was made by a 9-2 vote, which passes for a split outcome at the consensus-driven central bank, with two Fed governors dissenting for the first time in more than 30 years.
The seven members of the Fed Board of Governors are nominated by the president and confirmed by the U.S. Senate.
Trump has repeatedly demanded the Fed cut interest rates, citing moves by the European central banks and warned that delays could stall the U.S. economy.
He sees the rate cuts as leading to stronger growth and lower debt servicing costs for the federal government and homebuyers. The president argues there is virtually no inflation, even though the Fed’s preferred measure is running at an annual rate of 2.6%, slightly higher than the Fed’s 2% target.
Trump has called for slashing the Fed’s benchmark rate by 3 percentage points, bringing it down dramatically from its current average of 4.33%. The risk is that a rate cut that large could cause more money to come into the economy than can be absorbed, possibly causing inflation to accelerate.
Trump has previously denied reports that he is looking to fire Powell before the Fed chair’s term ends next year, calling such a move “highly unlikely,” but left the door open to taking action over what he called “possible” fraud.
The Supreme Court suggested in a May ruling that Trump could not remove Powell for policy disagreements. This led the White House to investigate whether the Fed chair could be fired for cause because of the cost overruns in its $2.5 billion renovation projects.
Powell’s term as chair ends in May 2026, at which point Trump can put his Senate-confirmed pick in the seat.
Türkiye’s manufacturing sector continued to lose momentum in July, a survey showed Friday, as weak demand caused significant slowdowns in both new orders and output.
The Türkiye Manufacturing Purchasing Managers’ Index (PMI) fell to 45.9 in July from 46.7 in June, the Istanbul Chamber of Industry (ISO) said.
That marked the third consecutive monthly decline and the most pronounced moderation since October 2024.
PMI readings above 50.0 indicate growth in activity, while those below point to a contraction. Business conditions have now eased for 16 consecutive months, underscoring persistent challenges in the sector.
A key theme of the latest survey was subdued customer demand and, in turn, new orders easing the most since March, the survey showed, while international demand also remained weak.
Consequently, manufacturers scaled back production while employment and purchasing activity were reduced, and efforts were made to limit inventory holdings, the panel showed.
Stocks of purchases eased to the largest degree since October 2024, while stocks of finished goods were markedly depleted following a slight rise in June.
Currency weakness continued to drive sharp increases in input costs while selling prices rose at a slightly faster pace than in June.
“There was little in the way of positive news from the latest Turkey manufacturing PMI as the challenges for firms in securing new orders percolated through the sector,” said Andrew Harker, Economics Director at S&P Global Market Intelligence.
“Manufacturers will be hoping to see some pick-up in demand conditions as the second half of the year progresses.”
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