Economics Reporters Ought To Study Economics
Instead of just repeating what other wayward reporters are saying.
I read a recent Noah Smith piece about how economics writers keep getting an important aspect of trade policy wrong. They continue to state that trade imports subtract from GDP, which is not the case.
As Smith enumerates:
This week, U.S. GDP data for the first quarter of 2025 (January through March) was released. The data showed that the U.S. economy shrank at an annualized rate of 0.3%. But almost every economics journalist and columnist reported that this decline was due to a surge of imports, as American companies rushed to stock up on foreign-made goods ahead of Trump’s tariffs.
For example, here is the Wall Street Journal:
[T]he main driver of the first-quarter contraction was Trump’s trade war…Businesses rushed to get ahead of tariffs…Imports rose at the fastest pace since the third quarter of 2020… Imports subtract from the Commerce Department’s calculation of GDP, since they represent spending on foreign-made goods and services. [emphasis mine]
And here is Bloomberg:
The GDP figures showed imports surged an annualized 41.3% — the biggest advance in nearly five years. Because these goods and services aren’t produced in the US, they are subtracted from GDP. [emphasis mine]
He has more examples. The math is simple. Again, Smith:
GDP is a measurement of everything produced within a country’s borders. Imports are produced outside a country’s borders. So imports don’t add to or subtract from GDP. Imports simply aren’t counted in GDP at all.
Let’s think about some examples. Suppose an American buys a TV made in China for $1000. Remember that GDP can be calculated as the sum of consumption, investment, government purchases, and net exports:
GDP = Consumption + Investment + Government Purchases + Net Exports
When the American buys the $1000 TV from China, U.S. consumption goes up by $1000. And U.S. net exports go down by $1000, since “net exports” means exports minus imports. The increase in consumption exactly cancels out the fall in net exports. So the total contribution of the imported TV to U.S. GDP is zero.
I’m only remaking this point now because this morning, I heard senior economic reporter Scott Horsley of NPR make the same stupid claim about imports being subtracted from GDP. I can’t find the quote because NPR’s website is a few days behind what is broadcasted. But he followed all the other fools, repeating garbage science, and no one tells them to shut up.