The U.S. economy expanded in the second quarter at a slower pace than expected, as imports tied to artificial intelligence — notably semiconductors — reduced net domestic growth. While several economic indicators remained strong, a portion of the expansion reflected increased foreign purchases, which weighed on overall GDP gains.
Consumption, investment and imports
Consumer spending picked up during the quarter despite persistent inflation. Business investment remained robust, driven in part by the buildout of AI infrastructure. However, higher imports of equipment and components needed for that AI buildout, particularly semiconductors, grew and subtracted from overall growth by increasing the trade deficit component of GDP.
Policy shocks and public sentiment
Reuters noted that in the first 18 months of U.S. President Donald Trump’s tenure the economy has withstood a series of policy‑driven economic shocks — including tariffs and the energy crisis tied to the Iran conflict — better than many economists had expected. Still, public sentiment has darkened ahead of the midterm elections: a CNN poll found 65% of Americans felt that Donald Trump’s policies have worsened economic conditions.
Why this matters
The rising demand for AI applications and the investment to support them will continue to drive corporate spending, but the associated import needs can blunt the domestic growth impact in the near term. Worsening public perceptions of the economy may also affect political risk and consumer confidence in upcoming quarters, especially around the election cycle.
Author: Brendan Ruberry
Timeframe: second quarter (Q2) — reporting on Q2 performance
