U.S. GDP Surges 3% in Q2 on Trade Shift, Consumer Strength
The U.S. economy grew 3% in the second quarter, surpassing expectations as falling imports and steady consumer spending helped reverse a weak Q1. The trade balance shift, largely driven by tariff-related timing, played a major role in the rebound, even as exports declined. Inflation eased modestly but remained above the Fed’s target, while signs of softening demand and housing weakness emerged. Markets reacted quietly to the report, and President Trump renewed calls for rate cuts, citing low inflation and consumer resilience.
Job Growth Slows Sharply as Unemployment Rises
U.S. nonfarm payrolls grew by just 73,000 in July—well below expectations—while the unemployment rate ticked up to 4.2%, signaling a weakening labor market. Previous months’ job gains were revised sharply lower, and most of July’s growth came from just two sectors: health care and social assistance. Weakness was broad, with federal employment, business services, and participation all declining, while long-term unemployment rose and a broader measure of joblessness hit a 16-month high. The disappointing report fueled expectations of a Fed rate cut in September and drew renewed criticism from President Trump, who blamed high rates and trade-related uncertainty.
Fed Holds Rates Steady Amid Trump Pressure, Eyes September Data
The Federal Reserve kept interest rates unchanged at 4.25%–4.5% for the fifth straight meeting, resisting pressure from President Trump, who has aggressively pushed for a cut. Chair Jerome Powell emphasized the Fed’s focus on achieving full employment and 2% inflation, noting that while inflation has eased since 2022, it remains elevated. Two Trump-appointed Fed governors dissented, voting for a rate cut, marking the first double dissent in over 30 years. The Fed will rely on upcoming jobs and inflation data before deciding on any rate moves in September, with businesses and consumers closely watching for potential relief through lower borrowing costs.
Trump Pauses Mexico Tariff Hike for 90 Days to Pursue Trade Deal
President Trump announced a 90-day delay on raising tariffs against Mexican goods, following a “very successful” call with President Claudia Sheinbaum. The existing tariffs—25% on cars and pharmaceutical drugs, and 50% on metals—will remain in place as both sides work toward a trade agreement. Trump said Mexico agreed to eliminate unspecified non-tariff trade barriers, signaling progress in talks despite no formal deal yet. The delay highlights Mexico’s key role in U.S. trade and the value Trump places on maintaining cooperation with its government.
