Suppose you measure something (for example, GDP) in two steps. First, add summer (for example, import value). Second, subtract the same value. You might focus on the second manipulation and say, “Import is a subtraction in the calculation of GDP.” Focusing on the first operation, “Import is added to the calculation of GDP,” you might say equally. However, taking the two operations together, the fact that imports are not part of GDP will not increase the laws or regulations.
In a press release. This focus is highly misleading and does not address the department’s methodology and technical literature.
The total value of the final goods and services was generated domestically in the economy. In other words, when you look at GDP from the expenditure side, there is a family equation.
GDP = C + R&G + X -M.
Forget M for now. The accounting identity equation states that GDP must also be equal to the sum of consumption expenditure (c), investment expenditure (i), government expenditure (g), and exports (x). In fact, each of these variables (c, i, g, x) includes imports as statistics collected. You must subtract the total amount (M) of the total amount (M) of the total amount of imports. Therefore, the above equation.
Equations are usually rewritten in the same way as exact mathematics.
gdp = c + i + g +(x -m),
It suggests the false interpretation that “net export” or “trade deficit” (x -m) subtracts fabric from GDP. Professionals or economics students who have taken excellent courses in macroeconomics from a great university know that this interpretation is incorrect. However, ordinary or superficial journalists or editors are easily misunderstood. Misinterpretation also offers protectionist activists (like Peter Navarro, his Harvard PhD in Economics!).
Readers will find some of my articles and posts (intertwined with further explanations and quotes including BEA). “St. Louis gave birth to imports and GDP,” Econlog, September 6, 2018. “Peter Navarro’s conversion,” regulation, fall 2018. “Misleading bureaucrats,” Econlog, October 30, 2017); “To misuse GDP misuse,” Regulations, Winter 2016 to Winter 2017 (p. 68); “Does imports drag the economy?” Regulations, Fall 2015.
As you can see, neither the Wall Street Journal nor the financial time to eat to grasp this simple statistical fact. Interestingly, and to my knowledge, the economists have shown that it understands. See May 1, 2025, “Don’t condemn the fall import of US GDP.”
It is important to distinguish accounting identity (such as those discussed) from economic debates. The former is by definition true. Latter must support valid theory and evidence. It is difficult to construct valid protectionist theory that shows that imports reduce GDP, if not impossible. Standard economic theory, on the contrary, can explain, among other phenomena, how foreign war embargoes, or equivalently domestic tariffs or prohibitions, can reach production via imported inputs (inputs account for more than half of American imports).
According to Bea’s advance estimates (this is almost constantly revised as more data becomes available), US GDP was supported in the first quarter of 2025 in the last quarter of 2024, with imports rising 41%.
One explanation for the coincidence of higher imports and lower GDP in the first quarter is the front-load of imports before President Trump’s tariffs hit. Consumers, intermediaries and producers have tried to beat the tariff deadline. For example, auto dealers have increased their ES inventory for foreign-made cars (or those containing foreign-made parts) to meet customer demand. Maritime traffic between China and Los Angeles has confirmed front roads of many other imports. In response to consumer demand, domestic production of alternatives may have declined significantly. However, this phenomenon is quickly compensated by domestic (reverse) alternatives for imported production due to tariffs.
Another explanation is that the uncertainty and pessimistic expectations caused by Trump’s protectionist income were well suited to launch a recession. This is defined as a negative level of GDP and negative levels such as unemployment.
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ChatGpt took the initiative to add photos of the wall. The person on the left looked like Adam Smith, and the person in the middle looked like Karl Marx. I asked “he” about it and he confirmed. He said the one on the right was John Maynard Keynes. I decide that it was not a bad idea and kept it, but such a photo would be unusual in the newsroom.
A confused journalist
