The size of the U.S. economy grew in the second quarter of this year by a lot — 3%, annualized. That’s after it contracted in the first quarter by 0.5%. But as is so often the case in economics and elsewhere, looks can be deceiving.

Three percent GDP growth is pretty great. Pretty solid. It’s just that, as Thomas Ryan put it, “that figure is very misleading.”

Ryan is a North America economist with Capital Economics. He said the 3% figure is “sort of driven by a quirk.” The quirk? Trade chaos. 

In the first quarter of 2025, companies across the economy binged on imports, stockpiling before tariffs hit. Then when tariffs hit, a lot of them stopped importing so much.

“As a result of imports slumping, that’s boosted GDP quite strongly,” Ryan said.

That’s how the math works when calculating GDP — imports are a negative, so less imports is a positive, and GDP grew. What does the economy look like if we take out the trade chaos?

“Under the hood, it does look like there’s some cooling in the relatively solid growth we’ve experienced in 2023 and 2024,” said Jonathan Pingle, chief U.S. economist at UBS. 

If you want to look at the core of the economy, the beating heart of it all, you look at how much we consumers and businesses are all buying and investing. At the end of last year that was growing at a solid 3.4%. Then it slipped to 2.9%, then 1.9%, and now 1.2%. 

“A lot of the slowing is on the kind of residential investment and structures side,” said Justin Weidner, an economist with Deutschebank.

The housing market is not thrilled by high interest rates. And as far as investment, low oil prices have kept a lid on the oil and gas sector, which is a big one.

“So a little bit of a slowdown relative to earlier in the year, but still a decent number,” Weidner said.

The big question is, of course, what happens next?

“Is this just, you know, sort of two soft quarters and then we perk back up again?” said UBS’s Justin Pingle. “Or is this the new run rate, or, you know, which is the worst scenario? Worser scenario is we slow further.”

For now, overall, economic growth is not as good as it seems, but not as bad as it could be.