Assessing the Sustainability of U.S. Q3 2025 Growth Amid AI-Driven Momentum and Tariff Risks

The U.S. economy's Q3 2025 growth, reported at an annualized rate of 4.3% by the Bureau of Economic Analysis (BEA), defied expectations and underscored the resilience of AI-driven investment amid persistent tariff pressures. This growth, however, raises critical questions about its sustainability. While artificial intelligence (AI) has emerged as a powerful counterweight to economic headwinds, its long-term efficacy in offsetting structural challenges like tariffs, inflation, and uneven consumer spending remains uncertain.

AI as a Growth Engine: Momentum and Limitations

AI-related capital expenditures contributed 1.1% to U.S. GDP growth in the first half of 2025, with 92% of H1 growth attributed to investments in AI data centers and supporting infrastructure. Deloitte's 2025 tech value survey further highlights that 74% of corporate technology budgets were allocated to AI and generative AI initiatives. These figures reflect a seismic shift in business investment priorities, driven by hyperscalers like Meta, Microsoft, and Alphabet, which have poured resources into AI hardware such as GPUs and servers.

Yet, the economic impact of AI is not fully captured by traditional GDP metrics. Goldman Sachs notes that AI's $160 billion contribution to growth in 2025 is underrepresented in official statistics, as semiconductors-key to AI infrastructure-are classified as intermediate inputs rather than final goods. This misalignment suggests that the true economic value of AI may be underestimated, complicating efforts to assess its long-term sustainability.

The U.S. average effective tariff rate surged from 2.5% in early 2025 to over 10% by August, with projections of 15% by early 2026. These tariffs have inflated consumer prices, with core PCE inflation remaining at 3% in 2025. Deloitte reports that 57% of U.S. consumers now anticipate economic weakening, reflecting eroding confidence in purchasing power.

The ripple effects of tariffs are particularly pronounced in sectors like retail and construction, where small businesses face margin compression. For example, 78% of retail buyers have adopted AI tools to navigate trade policy shifts, including accelerating holiday orders by two months to mitigate cost uncertainties. While such adaptations demonstrate short-term agility, they also highlight the fragility of supply chains under sustained tariff pressures.

High-income households, buoyed by AI-driven equity gains and wealth effects, have maintained robust spending, while lower-income consumers face stagnating wages and higher prices. The University of Michigan's consumer sentiment index fell nearly 30% year-over-year, with only high-income stockholders showing improved outlooks.

This polarization underscores a critical vulnerability: AI's growth benefits are unevenly distributed. While PIMCO estimates AI contributed 0.5 percentage points to real GDP growth in 2025, its ability to stimulate broad-based demand remains constrained by labor market bottlenecks and income inequality.

On one hand, AI's capital-intensive nature has offset some trade policy drag, particularly for large corporations with resources to absorb costs. On the other, the BEA's Q3 GDP report notes that net exports-distorted by tariffs-remain a wildcard, with import volume adjustments creating temporary GDP fluctuations.

The interplay between AI investment and tariff impacts suggests a mixed outlook for sustainability.

Moreover, the One Big Beautiful Bill Act's anticipated fiscal support in 2026 introduces uncertainty, as shifting trade and immigration policies could exacerbate sectoral divergences. For AI-driven growth to endure, policymakers must address structural bottlenecks, including labor shortages and the misclassification of AI inputs in GDP metrics.

The U.S. economy's Q3 2025 performance demonstrates that AI investment can temporarily offset tariff-driven headwinds and stabilize growth. However, this equilibrium is tenuous. Without reforms to address inflationary pressures, supply chain fragility, and income inequality, the long-term sustainability of AI-driven momentum remains in question. Investors must weigh the sector's transformative potential against the risks of policy-induced volatility and uneven economic gains.