I'm a bit confused about the bit about the "Imports expanded 37.9%, fastest since 2020, and pushed GDP down by nearly 4.7 percentage points" bit.
Presumably when they calculated GDP previously, they hadn't seen quite as much imports, but had seen higher spending, thus they misattributed some of it to domestic products rather than imports, though I'm a bit confused as to how they underestimated imports given everything is declared. Perhaps some changes in the price index?
Though other articles talk about the expected GDP next quarter being higher because they don't expect a surge of imports to continue, which makes no sense to me unless one assumes spending remains the same with or without imports.
iamtheworstdev · 57m ago
stolen from investopedia: The GDP formula is commonly expressed as GDP = C + I + G + (X - M), where C is consumer spending, I is business investment, G is government spending, and (X - M) represents net exports (exports minus imports). This formula helps measure the total economic output of a country during a specific period.
Our tariffs are tampering with the intelligent monitoring of GDP growth. When the USA expanded tariffs to 155% with China it was effectively an embargo, so imports went away (but exports didn't) and our GDP looked amazing. When the tariffs were brought back to previous rates of 55%, companies bought every import they could (or had them released from bonded warehouses) which has pumped the GDP in the other direction. And it'll likely be the same situation next month because Chinese ports are seeing record numbers as US companies try to buy every piece of inventory they can before these tariffs go back up.
hayst4ck · 31s ago
One of the most upsetting things about our current state of governance is gamed metrics and lack of a national metrics "dashboard."
Metrics are gamed as marketing tools rather than assessment tools. There's a clear conflict of interest in the government presenting the metrics that it says to judge them by.
Unemployment is another gamed metric. If you want to get a sense of unemployment, a graph of % employed tells you more than some game numbered like "unemployment" since "unemployment" is a direct measure of political success.
Consumer spending/GDP are also directly used to measure political success, and a metric like "Aggregate Visa/mastercard purchases" is going to give a much better sense of how much people are spending.
During COVID, all cause mortality is a superior metric than COVID attributed deaths because any death attributed to COVID represented a failure of public health policy. We even saw direct attacks on public health monitoring in Florida.
It seems like the only ways to combat this are either states presenting their own metrics, to imply national trends based on their own. I definitely wonder what kind of information we could get that is accurate and not gamed to create our own dashboards. Geohot's use of national energy consumption to estimate national productivity was sharp and the type of thing I wish journalists would do.
That seems very strange to me that GDP is the same, when import:export is 4:3 or 3:2, but explains why someone would care more about the difference than the absolute values.
notahacker · 4m ago
They're accounting identities, not casual relationships. Exports are stuff that's part of domestic product (but not consumed domestically) so get added. Imports are stuff domestic consumers get the benefit of but aren't actually produced domestically, hence the direction of the signs in the accounting identity. The 4:3 ratio is consistent with an economy which might be more open than a 3:2 one, but it doesn't actually have a higher GDP unless there's higher consumption or investment or government spending as a result of the extra trade.
The key part is that nobody should care about any values or ratios in isolation or impute causality that isn't there. Otherwise people start believing that doing crazy stuff to shrink a trade deficit results in higher GDP, as opposed to lower C+I+G. And when those people are sufficiently stubborn and sufficiently powerful, you get $economy shrank 0.5% in the first quarter headlines...
yread · 5m ago
If you import something and immediately export it the ratio changes but the difference doesnt
jfengel · 31m ago
Spending did not keep up; if it had, the net effect on GDP would be zero.
This is companies stocking up, and the items are in inventory. They will sell it over the next quarter or so, at which point the tariffs will really weigh.
outside1234 · 1h ago
My theory would be that a lot of companies imported a ton in the first quarter knowing that tariffs were coming.
Espressosaurus · 1h ago
My company did that. Along with rushed some deliveries that weren't 100% ready to avoid the sudden spike in tariffs.
I also personally did that for expensive gear I was otherwise planning on waiting on. And now I'm not going to be buying that over the next 2-5 years like I was originally planning.
It's a big bolus of spending that will not be replicated in the future.
don_neufeld · 18m ago
Yup, did the same, ton of new hardware.
Last week I was looking at a proposal from a supplier that's got a ~8K "tariff" line on it and thinking... y'know, I can wait on that project.
WaxProlix · 1h ago
Sure, but GP's point is that that level of spending likely won't continue now that the (forecasted) demand has been met.
RC_ITR · 36m ago
Preamble:
GDP, is a bit of a synthetic metric.
As you point out, there's no purchase level data about what's imported vs. not.
The way this is handled is that this quarter's imports are set against this quarter's consumption - basically the method assumes the import/domestic mix of business inventories stays the same (true enough in the long run, very incorrect in short term shocks).
That's why extremely disingenuously the AP says:
>Trade deficits reduce GDP. But that’s just a matter of mathematics. GDP is supposed to count only what’s produced domestically, not stuff that comes in from abroad. So imports — which show up in the GDP report as consumer spending or business investment — have to be subtracted out to keep them from artificially inflating domestic production.
Answer:
What happened here[1] is that the BLS makes a bunch of assumptions to get data out in time (preliminary figures based on historical seasonal trends, etc.) but this quarter, their assumptions about consumer spend were far too aggressive.
It happens all the time, especially in strange times like 1Q was, but there's also career/political incentive to be aggressive on the advanced data, since that's what drives the big headlines.
I assumed, like President said, that it will be China, not me, who pays the tariffs. I was very much wrong.
I get a lots of moving parts from China, assemble those together and sell in a one single product on US soil and outside (imagine a watch made out of 2,000 parts). As it turned out with 25% tariffs, it turned out that there is another charge that is related to "processing fee". On most $10 items that fee was $17. Obviously make no economical sense. So doing a quick economics of sale, and knowing each separate package is a separate "processing fee" we would have to bump up my price some 30,000%. So instead of doing so, which wouldn't make any sense, we have moved the whole production to Europe. Tariffs are non-existent and even with 24% VAT (local tax) it is way cheaper to produce your merch and then send it to USA, in one complete piece, if anyone wants to buy on a US soil. The only inconvenience is the package takes about 10 days of delivery, no other differences. My company located in Texas is letting go the final employees at the end of this month, some 45 emps. We had offer current emps to move to Europe but noone wanted or had proper credentials to work on EU soil. Our choice was this OR closing down the whole company. I imagine many other corps and in similar position.
whatshisface · 38s ago
Thank you for providing real world, quantitative information to the conversation.
unsnap_biceps · 2m ago
Even if China paid the tariffs, how did you expect it to work? The manufacturers would just eat the entire fee and give you stuff for under cost?
Presumably when they calculated GDP previously, they hadn't seen quite as much imports, but had seen higher spending, thus they misattributed some of it to domestic products rather than imports, though I'm a bit confused as to how they underestimated imports given everything is declared. Perhaps some changes in the price index?
Though other articles talk about the expected GDP next quarter being higher because they don't expect a surge of imports to continue, which makes no sense to me unless one assumes spending remains the same with or without imports.
Our tariffs are tampering with the intelligent monitoring of GDP growth. When the USA expanded tariffs to 155% with China it was effectively an embargo, so imports went away (but exports didn't) and our GDP looked amazing. When the tariffs were brought back to previous rates of 55%, companies bought every import they could (or had them released from bonded warehouses) which has pumped the GDP in the other direction. And it'll likely be the same situation next month because Chinese ports are seeing record numbers as US companies try to buy every piece of inventory they can before these tariffs go back up.
Metrics are gamed as marketing tools rather than assessment tools. There's a clear conflict of interest in the government presenting the metrics that it says to judge them by.
Unemployment is another gamed metric. If you want to get a sense of unemployment, a graph of % employed tells you more than some game numbered like "unemployment" since "unemployment" is a direct measure of political success.
Consumer spending/GDP are also directly used to measure political success, and a metric like "Aggregate Visa/mastercard purchases" is going to give a much better sense of how much people are spending.
During COVID, all cause mortality is a superior metric than COVID attributed deaths because any death attributed to COVID represented a failure of public health policy. We even saw direct attacks on public health monitoring in Florida.
It seems like the only ways to combat this are either states presenting their own metrics, to imply national trends based on their own. I definitely wonder what kind of information we could get that is accurate and not gamed to create our own dashboards. Geohot's use of national energy consumption to estimate national productivity was sharp and the type of thing I wish journalists would do.
The key part is that nobody should care about any values or ratios in isolation or impute causality that isn't there. Otherwise people start believing that doing crazy stuff to shrink a trade deficit results in higher GDP, as opposed to lower C+I+G. And when those people are sufficiently stubborn and sufficiently powerful, you get $economy shrank 0.5% in the first quarter headlines...
This is companies stocking up, and the items are in inventory. They will sell it over the next quarter or so, at which point the tariffs will really weigh.
I also personally did that for expensive gear I was otherwise planning on waiting on. And now I'm not going to be buying that over the next 2-5 years like I was originally planning.
It's a big bolus of spending that will not be replicated in the future.
Last week I was looking at a proposal from a supplier that's got a ~8K "tariff" line on it and thinking... y'know, I can wait on that project.
As you point out, there's no purchase level data about what's imported vs. not.
The way this is handled is that this quarter's imports are set against this quarter's consumption - basically the method assumes the import/domestic mix of business inventories stays the same (true enough in the long run, very incorrect in short term shocks).
That's why extremely disingenuously the AP says:
>Trade deficits reduce GDP. But that’s just a matter of mathematics. GDP is supposed to count only what’s produced domestically, not stuff that comes in from abroad. So imports — which show up in the GDP report as consumer spending or business investment — have to be subtracted out to keep them from artificially inflating domestic production.
Answer: What happened here[1] is that the BLS makes a bunch of assumptions to get data out in time (preliminary figures based on historical seasonal trends, etc.) but this quarter, their assumptions about consumer spend were far too aggressive.
It happens all the time, especially in strange times like 1Q was, but there's also career/political incentive to be aggressive on the advanced data, since that's what drives the big headlines.
[1]https://www.bea.gov/system/files/gdp1q25-3rd-chart-02.png
I assumed, like President said, that it will be China, not me, who pays the tariffs. I was very much wrong.
I get a lots of moving parts from China, assemble those together and sell in a one single product on US soil and outside (imagine a watch made out of 2,000 parts). As it turned out with 25% tariffs, it turned out that there is another charge that is related to "processing fee". On most $10 items that fee was $17. Obviously make no economical sense. So doing a quick economics of sale, and knowing each separate package is a separate "processing fee" we would have to bump up my price some 30,000%. So instead of doing so, which wouldn't make any sense, we have moved the whole production to Europe. Tariffs are non-existent and even with 24% VAT (local tax) it is way cheaper to produce your merch and then send it to USA, in one complete piece, if anyone wants to buy on a US soil. The only inconvenience is the package takes about 10 days of delivery, no other differences. My company located in Texas is letting go the final employees at the end of this month, some 45 emps. We had offer current emps to move to Europe but noone wanted or had proper credentials to work on EU soil. Our choice was this OR closing down the whole company. I imagine many other corps and in similar position.