Tariff refunds boost GDP growth to 4.3% as corporate profits surge

The U.S. economy is experiencing a surge in growth, driven by a combination of factors including tariff refunds, an AI spending boom, tax cuts from the One Big Beautiful Bill Act, and the reshoring of manufacturing. According to Apollo Chief Economist Torsten Slok, these tailwinds are propelling third-quarter GDP growth to an estimated 4.3%, a significant acceleration from the 1.5% growth in the second quarter and 2.1% in the first quarter. The tariff refunds, which stem from the Supreme Court's February ruling that struck down import taxes collected under the International Emergency Economic Powers Act, are already boosting corporate earnings. A Wall Street Journal tally shows that 40 S&P 500 companies have recorded $9.6 billion in refunds, with Apple alone receiving nearly $2.2 billion. Other major recipients include Nike, FedEx, Amazon, and General Motors. Slok estimates that these refunds will contribute about 0.2 percentage point to third-quarter GDP growth. The refunds represent about 60% of the $166 billion in revenues collected from the struck-down import taxes. Some U.S. consumers are filing lawsuits against companies to demand a share of the refunds, while firms like Amazon, FedEx, and UPS have vowed to return the funds to customers. Bank of America analysts noted that retailers are using the returned money to fund promotions and offset supply-chain costs, and some may work with brands to recoup tariff money through direct payments or future purchase order negotiations. Despite a surprisingly weak jobs report for July, Slok argues that the economy is not losing momentum, attributing the sharp drops in government payrolls and hospitality employment to seasonal adjustment quirks. After backing out those sectors, the economy would have added 70,000 jobs, in line with Wall Street's consensus, instead of losing 23,000 jobs. Jobless claims have hovered around 200,000 a week, and job openings have been rising over the past six months. Slok concludes that the market is underestimating the strength of current growth, and as a result, interest rates will stay higher for longer. The combination of these factors suggests a robust economic outlook, with the potential for continued growth in the coming quarters.