GDP fell in Q1 because businesses rushed to import goods before Trump’s tariffs hit. The real pain begins when prices rise, goods slow, and Americans foot the bill for a performance they never asked.
They are just so evil. But it will be hard to hide the China foul up. The tariff is going to be very noticeable, and competition for scarce goods will drive prices even higher. Add on what are likely to be much higher shipping costs, the pain will reach levels of lethality.
I also think Trump’s lies about deals are very obvious to everyone. He is a braggart. If he had deals there is no way he could stop himself from talking about them.
In addition all the layoffs at car manufacturers, UPS, the government—everyone will know people (particularly in red states) who are suffering direct hits. Trump has tried to cover too many bases all at once. His lies are insufficient to the task. No school lunches. No vaccines for COViD or measles…this is where revolution begins. Hurt people’s children and they will become rabid in their opposition.
The regime’s lack of sympathy on everything from a 401k to how many dolls you can buy for Christmas is absolutely tone deaf.
"That flood widened the trade deficit and dragged GDP down."
No. Trade deficits do not cause economic slowdown. Layoffs and loss of confidence in stable government policies drive economic contraction. Targeting farm laborers reduces farm output. Threats of tariffs drives other nations to switch away from US suppliers in things like agricultural and military products, which *does* contribute to contraction even as it causes a widening of the trade deficit and a decrease in tax revenues.
You're right that trade deficits aren’t inherently bad and don’t directly cause economic slowdowns. But in this case, the surge of imports ahead of tariffs widened the trade deficit in that quarter, which reduced GDP mathematically — not because the economy was weakening, but because of how GDP is calculated:
𝐺𝐷𝑃=𝐶+𝐼+𝐺+(𝑋−𝑀)
When imports (M) spike and exports (X) don’t rise alongside, (X - M) shrinks — and that drags GDP lower in accounting terms, even if overall demand is strong.
So the slowdown wasn’t caused by the trade deficit itself, but by the timing and structure of those pre-tariff import surges. You’re absolutely right that longer-term contraction comes from policy instability, loss of global trust, and retaliatory shifts in demand — but those play out over multiple quarters. This was about a short-term distortion with real impact on quarterly GDP.
And I contend that increased imports are benign as is trade balance. Increased imports go into inventory. 🔼 I = 🔼 M, a net wash in terms of economic growth - and ultimately contribute to future wholesale or retail sale. If anything, the increased imports will modestly soften the Trump supply chain crash caused by trying to strong arm China.
The direct cause of the down quarter was reduced exports and increased unemployment.
I don’t think kidnapping and shipping immigrants to a hellhole death camp is foreign policy either. But every time a judge shuts them down they claim said judge is interfering in foreign policy😤😤😤
Shankar, curious as to whether you have listened to British economist Gary Stevenson? He has some really interesting ideas about how wealth is moved upwards and the corresponding effects on inequality.
Just look at states strongly controlled by the GOP, especially ones like Texas and Florida with large non-white populations: they replace progressive income taxes with regressive sales taxes and offer bare bones medicaid for the poor.
The Republicans control all branches of the federal government and are trying to make the whole nation look like Florida. Tariffs make a lot of sense to Republicans ideologically, even if they may regret that tariffs make most citizens poorer.
They are just so evil. But it will be hard to hide the China foul up. The tariff is going to be very noticeable, and competition for scarce goods will drive prices even higher. Add on what are likely to be much higher shipping costs, the pain will reach levels of lethality.
I also think Trump’s lies about deals are very obvious to everyone. He is a braggart. If he had deals there is no way he could stop himself from talking about them.
In addition all the layoffs at car manufacturers, UPS, the government—everyone will know people (particularly in red states) who are suffering direct hits. Trump has tried to cover too many bases all at once. His lies are insufficient to the task. No school lunches. No vaccines for COViD or measles…this is where revolution begins. Hurt people’s children and they will become rabid in their opposition.
The regime’s lack of sympathy on everything from a 401k to how many dolls you can buy for Christmas is absolutely tone deaf.
"That flood widened the trade deficit and dragged GDP down."
No. Trade deficits do not cause economic slowdown. Layoffs and loss of confidence in stable government policies drive economic contraction. Targeting farm laborers reduces farm output. Threats of tariffs drives other nations to switch away from US suppliers in things like agricultural and military products, which *does* contribute to contraction even as it causes a widening of the trade deficit and a decrease in tax revenues.
You're right that trade deficits aren’t inherently bad and don’t directly cause economic slowdowns. But in this case, the surge of imports ahead of tariffs widened the trade deficit in that quarter, which reduced GDP mathematically — not because the economy was weakening, but because of how GDP is calculated:
𝐺𝐷𝑃=𝐶+𝐼+𝐺+(𝑋−𝑀)
When imports (M) spike and exports (X) don’t rise alongside, (X - M) shrinks — and that drags GDP lower in accounting terms, even if overall demand is strong.
So the slowdown wasn’t caused by the trade deficit itself, but by the timing and structure of those pre-tariff import surges. You’re absolutely right that longer-term contraction comes from policy instability, loss of global trust, and retaliatory shifts in demand — but those play out over multiple quarters. This was about a short-term distortion with real impact on quarterly GDP.
And I contend that increased imports are benign as is trade balance. Increased imports go into inventory. 🔼 I = 🔼 M, a net wash in terms of economic growth - and ultimately contribute to future wholesale or retail sale. If anything, the increased imports will modestly soften the Trump supply chain crash caused by trying to strong arm China.
The direct cause of the down quarter was reduced exports and increased unemployment.
I don’t think kidnapping and shipping immigrants to a hellhole death camp is foreign policy either. But every time a judge shuts them down they claim said judge is interfering in foreign policy😤😤😤
Thank you Shankar. On Point
Well said, and brilliant!
Spot on!
Shankar, curious as to whether you have listened to British economist Gary Stevenson? He has some really interesting ideas about how wealth is moved upwards and the corresponding effects on inequality.
Just look at states strongly controlled by the GOP, especially ones like Texas and Florida with large non-white populations: they replace progressive income taxes with regressive sales taxes and offer bare bones medicaid for the poor.
The Republicans control all branches of the federal government and are trying to make the whole nation look like Florida. Tariffs make a lot of sense to Republicans ideologically, even if they may regret that tariffs make most citizens poorer.