The absolute key to the first quarter GDP result is to remember that ‘imports‘ are a deduction in the economic equation of Gross Domestic Product. The GDP is the valuation of all goods and services produced in the USA *minus* the value of imports.
The Bureau of Economic Analysis (BEA) releases the results of the first quarter GDP. The overall economic growth seems low at –0.3% until you look at how U.S. companies responded in February and March to the tariff announcement.
Companies proactively purchased massive amounts of products in advance of the tariffs leading to an overall increase in imports of 41.3%. Which results in a 5.3% deduction to GDP. Every dollar of those imports is a deduction to the GDP equation, giving the false appearance of lower domestic production.
There was a massive surge in import goods purchases of 50.9% versus the prior period [Table 1, line 20]. That’s the largest periodic increase in import purchases I have ever seen. Simultaneously, fixed asset investment in equipment for domestic production surged 22.5% [Table 1, line 11].
Put both of these metrics together and what you see are U.S. companies building consumer inventory from overseas (imports) while simultaneously preparing themselves to shift production into the USA. The massive import purchases are a bridge to cover the time needed to shift the manufacturing from overseas to the USA. This is exactly what we want to see.
To give more detail to the economic shift, we turn to Table 2 and look at the contribution impact to the GDP equation.
Here we can see that imports surged and led to a 5.03% deduction to the GDP equation. Meaning if all things were equal without the Q1 surge in import purchases the GDP would have been +5.0%.
Meanwhile the impact of federal spending decreased 0.33% as President Trump makes the federal government smaller, and federal spending contribution less. The federal government is getting smaller as a percentage of GDP. Again, a very positive sign.
Investment in the USA is high. MAGA working.
Imports are temporarily high, as companies prepare to purchase less from overseas. MAGA working.
Following the increase in U.S. investment and following the increase in equipment purchasing; we will see an increase in jobs as a result of hiring Americans to use the equipment and create the products. If the workforce tightens up (illegal alien deportation continues) and unemployment lessens, then pressure is created on wage rates as companies compete for workers. Main Street starts winning again.
Attach welfare support to employment efforts and the dependency model shrinks.
This is very good news all around.
@sundance I love it. I just hope 47 sticks with it and allows Chyna to self implode because there won’t be any jobs for all the unemployed Chinese factory workers. They will all be on a very long term summer vacation in the rural towns. And the Chinese Communist regime will have difficulty in justifying the Communist Manifesto for their population.
My concern with China? What happens when all of a sudden you have a lot of idle young men who can create internal problems for your regime? Why you send them off to war…
The standard formula for calculating GDP (mostly used to cause hysteria) doesn’t allow for context in what that evil “net exports” represents. Let them flail their arms & gnash their teeth. I’m patient.
I am so tired of this anti-President Trump, anti-America, BS from the network’news’ propaganda.
This really has to end or be ended.
Turn off the TV.
When I was growing up 60 years ago, my father used to call it the boob tube. It still is.
All it takes is for the FCC to review the Broadcast networks public service performance and yank their free licenses.
They are no longer providing a balanced, bias free service, therefore they no longer are no longer entitled to their use of public broadcast frequencies.
In fact, I would posit that since they are charging fees to corporations for advertising, they should be paying a fee on a per commercial basis to the federal government.
“From forty years’ experience of the wretched guess-work of the newspapers of what is not done in open daylight, and of their falsehood even as to that, I rarely think them worth reading, and almost never worth notice.”
–Thomas Jefferson to James Monroe, 1816
-How I Learned to Stop Worrying and Love Tariffs
Thanks for groovy video.
Read Sundance’s post twice, read all the comments, still don’t know-is the GDP up or down? Say it straight for a dumb bstrd like me. +.3,-.3, thread wrong, graph wrong?
As long as it hurts the CCP.
Go back to the article …. specifically look at the very last graph.
The NET was a decrease or -.3%.
The hurt China Inc. part is that our importers did a front load in order to beat the tariffs. That means no factory orders to China Inc. for 2-3 months among other issues China Inc. has to do financially to balance all the currency issues with the US and EU.
The bright spot for the US is that the Domestic part of the GDP equation showed that the economy expanded significantly by about 4%+, if one discounts the 50% surge in imports to beat the tariffs.
Lemme ‘splain it to you like you’re five years old. We imported a TON of stuff to avoid the tariffs before they kick in. If we hadn’t done that the GDP report today would have been very good, high, positive, excellent. So, the -0.3% GDP was not reflective of a slowing economy. In fact, the numbers in the charts show enormous investment and growth.
Great summary!
I have been trying to educate myself on tariffs, ever since the media and politicians went nuts over President Trump’s intentions on tariffs. It seemed to me that there had to be a positive side to them or they would not be used, but all I saw and heard were the negative aspects. I have a financial background and I still find the big picture of international trade, currency exchange, and related matters to be fuzzy. The biggest thing I have learned is that it is complicated with a lot of interconnected moving parts.
Don’t be discouraged Roll Away the Stone. All we can do is try to improve our knowledge so that we are informed voters and can share that knowledge with all of the nay-sayers.
Thank goodness for Sundance who has been a great help in understanding international trade.
The 5.03% is probably the deduction from total GDP. It doesn’t get added to the GDP growth rate to get a more normalized figure. Net exports are only around 11% of total GDP. Looking at other numbers the government released, if imports had been more normal, GDP growth would have been roughly flat to 0.3%%. Government spending also dropped, which gets deducted from GDP but is positive when it happens. Consumer spending, exports, and investment spending were all up.
The GDP number today makes Trump’s point for us … a trade deficit hurts our GDP. But he was good politically troll Biden and say it was still his economy.
We could have another huge trade deficit pull forward of imports in 2Q25 due to the 90 pause for negotiations. But, 3Q and 4Q could be huge GDP quarter with smaller trade deficit.
Once the market figured out the components of GDP were trade related and a cut in gubment spending, the markets rallied.
Also, remind me what I have to buy from China that I can only buy from China, and need it now? nothing… you can go a whole year buying nothing from China if you wanted to—that is how weak China’s position is … yet they have to import food, boeing jets, and nat gas to make the plastics for all the cr p they sell us.
Government spending is also counted in GDP. Hopefully it went down and will continue to do so.
I do believe it’s within the realm of possibility that Q1 may have been the bottom for the GDP
Imagine that.
They removed red dye from foods within a week or two. Zero red dye in Walmart Equate brand of children’s liquid “Benadryl” on the shelf as of March 16.
Trump cuts regulations and snaps his fingers, plants will be up and running in months, not years.
A significant portion of those imports was gold (figures are from the World Gold Council)…
In the case of the UK (home to the LMBA) 67% of their exports to the US was gold…
According to Financial Times, “since the U.S. election, 393 metric tonnes of gold have been moved into Comex vaults, increasing inventories there by nearly 75% to their highest level since August 2022. Additional shipments are believed to have gone to private vaults owned by HSBC and JPMorgan.”’
LBMA Precious Metals Market Report: Q1 2025 | LBMA
Singapore and Switzerland were also sources.
don’t forget to add in possible cover/because of Trump’s call for Fort Knox audit. So maybe some of the gold purchase and physical possession is to cover for past Fed or bank shenanigans. Just saying possible, gold traders are heavy on futures and options, last 9 months. Maybe Trump has set another front or trap for wall street and Fed.
Just another idea in the big pic.
The domestic investment numbers are significant…
Rapid Response 47
@RapidResponse47
White House Senior Counselor
@RealPNavarro:
“Everything that we’re doing is making the economy better and the best is yet to come. That building right there, that’s about to do a tax cut, the biggest and broadest in American history, in RECORD TIME.”
Video linked….
Winning.
Damn Radical Democrat and liberal mainstream media can’t get it except as usual continue beating with lies
president and He’s administration,MAGA,
Sundance these two sentences from your dissertation are fabulous: “This is exactly what we want to see. This is very good news all around”. Thank you sir for putting all of this into terms that anyone of us can understand and use to inform others of how MAGA is working for the betterment of the USofA.