The US third-quarter economic report is out, and it’s full of highlights. The GDP annualized growth rate reached 4.3%, not only surpassing the 3.8% in Q2 but also significantly exceeding Wall Street’s previous estimate of 3.3%. This better-than-expected performance directly impacted market expectations for the Federal Reserve’s rate cut pace and also sparked intense discussions about the long-term effects of the President’s economic policies.

Trump attributed this strong growth to his own tariff policies. However, a closer look at the data reveals that the true source of the economic momentum lies elsewhere. Growth in healthcare services and consumer spending are the main drivers. Trade factors contributed about 1.6 percentage points to GDP, which seems substantial, but whether this short-term fluctuation can be sustained remains a big question. Allen, a senior US economist at Pantheon Macroeconomics, pointed out that the boost from net exports in Q3 is unlikely to be sustained long-term, given that trading partners still have significant room for retaliatory measures.

The good news is that consumer performance was impressive. US consumer spending grew by 3.5% in Q3, far exceeding the 1.6% average of the previous six months. Coupled with a joint increase of about 3% in fixed investment and consumption, this indicates that the economic fundamentals remain resilient.

However, there are hidden risks beneath the prosperity. The GDP deflator’s annualized growth rate reached 3.8%, significantly higher than the market’s expectation of 2.7%. The rising inflationary pressure has directly weakened the Fed’s policy space and introduced uncertainty into market bets on rate cuts.