Datanomics: Net exports' contribution to US GDP growth at its peak

Net exports of goods and services contributed 4.99 percentage points to GDP growth in the second quarter of 2025, the highest in the US since at least 1947

Donald Trump’s move to raise tariffs on a slew of countries has paid dividends to the US economy in the second quarter of 2025 (Q2CY25). It grew by 3 per cent in Q2 year-on-year (Y-o-Y), against a 0.5 per cent GDP contraction Y-o-Y in Q1, due to rising exports and a fall in imports in Q2. However, this data does not factor in the tariff hike on Indian imports. It is too early to forecast whether this trend will continue, since a huge spike in imports in Q1, in anticipation of tariff hikes, was followed by a fall in imports in Q2. 

Boosting economy

 

Net exports of goods and services contributed 4.99 percentage points to GDP growth in Q2CY25, the highest in the US since at least 1947. This was a dramatic shift since it was net exports that had pulled down GDP growth by 4.6 percentage points in Q1CY25. It was also the highest negative contribution since at least 1947. 

 

India’s contribution to US trade deficit at its peak

 

The US had a trade deficit (goods) of nearly $466 billion in Q1CY25, its highest in the 21st century. This fell to around $267 billion in Q2. India’s share in this trade deficit reached 6 per cent in Q2, the highest this century, up from 3.7 per cent in Q1. 

 

Over 30% of exported Indian goods unaffected

 

Indian exports of petroleum products, electronic goods and pharmaceutical products currently enjoy exemption from tariffs on entry into the US. In FY25, India exported goods worth $86.51 billion to the US. Out of these, nearly 34 per cent do not face any tariffs as of now.