US Economic Growth Slows as Trade and Fuel Costs Rise
United States economic growth slowed sharply in the second quarter of 2026. The nation’s economy grew by 1.5 percent between April and June. This is down from 2.1 percent growth in the first three months of the year. The Bureau of Economic Analysis released this report on Thursday.
Experts say a bigger trade deficit is a key reason for the slowdown. High petrol prices also played a big part. Michael Klein, a professor at The Fletcher School at Tufts University, called it a “classic supply shock.” He noted that new tariffs and rising oil prices cause these problems.
The US bought more goods like computer chips and factory equipment. Business investment in equipment increased by more than 15 percent. This spending supports the growing artificial intelligence sector.
However, imports rose more than exports. This meant less overall growth for the US economy. Rachel Ziemba from the Center for a New American Security explained that the US is consuming and investing more. But it is not producing enough extra goods itself.
The trade deficit grew to $77.6 billion in May. This was a 42 percent jump from the month before. Exports fell by 3.2 percent. Imports rose by 3.3 percent. This happened as many countries tried to reduce their reliance on the US economy.
President Donald Trump’s tariff policies are a major reason for this shift. For example, Canada’s Prime Minister Mark Carney has sought new trade agreements. Canada has made deals with China and Saudi Arabia. This comes after President Trump put high tariffs on Canada.
Petrol prices also affected the economy. In May, US petrol reached $4.48 per gallon. Prices then dropped to $3.96 per gallon by the end of June. However, prices went up again in July after this data was collected.
High petrol prices pushed up inflation early in the second quarter. From March to April, prices jumped 5.4 percent. The next month, they rose another 7 percent. Prices then eased slightly in June.
Some consumer spending increased in June. People spent more on items other than petrol. They bought prescription drugs, cars, and new furniture. Spending on restaurants and hotels also went up.
However, Professor Klein said this spending came mainly from high-income earners. This shows a “K-shaped economy.” In this type of economy, rich people do well. Lower-income consumers and small businesses face more difficulties.
Consumer confidence fell for the third month in a row in July. People were worried about current business conditions. Experts expect little improvement for the rest of the year.
Businesses also need more certainty to invest and hire. Inconsistent trade policies make businesses hesitant. This uncertainty can slow down the economy further. For the economy to improve, people need to feel more secure about their jobs and future prices.
