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US economy shrank 0.5% in the first quarter, worse than earlier estimates
- ericyd 1y agoIf it weren't tragic it would be hilarious that Trump is the worst thing the US economy has seen since COVID.
- deleted 1y ago[deleted]
- Aloisius 1y agoI'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.
- outside1234 1y agoMy theory would be that a lot of companies imported a ton in the first quarter knowing that tariffs were coming.
- WaxProlix 1y agoSure, but GP's point is that that level of spending likely won't continue now that the (forecasted) demand has been met.
- Espressosaurus 1y agoMy 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 1y agoYup, 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.
- iamtheworstdev 1y agostolen 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.
- axus 1y agoThat 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.
- yread 1y agoIf you import something and immediately export it the ratio changes but the difference doesnt
- notahacker 1y agoThey'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...
- RC_ITR 1y agoPreamble: 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. [1]https://www.bea.gov/system/files/gdp1q25-3rd-chart-02.png https://www.bea.gov/system/files/gdp1q25-3rd-chart-02.png
- jfengel 1y agoSpending 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.
- cchance 1y agoI've heard this from a number of buyers for companies, that their companies have hugely held stockpiles, to avoid the tariff uncertainty in hope they get worked out before stockpiles run out... most of the ones i've talked to say its only gonna last a few months before shit really hits the fan
- Matticus_Rex 1y agoIn the quoted statement, they're reasoning from an accounting identity because they don't understand the underlying measure. There's a kernel of truth, but it's much more complicated than that. Imports are subtracted from the GDP calculation, BUT, that's only because they're added in the equation as well as part of consumption/investment/government spending. So to capture only the domestic production, since it's hard to measure consumption/investment/government spending only on domestic inputs, you just measure them overall, add exports, and subtract imports. So people see that in the equation imports are literally subtracted as a variable, and reason that if imports go up $X, that means GDP literally goes down by that amount. In reality — ignoring for a moment that we sometimes mismeasure consumption/investment/government spending, the net effect in the equation is 0. ON THE OTHER HAND, in one way part of the GDP drop here is because of imports. It's not something you can cleanly calculate the way journalists often try to, because there's a lot we don't know, but picture this simplified example: I'm a factory owner, and my factory uses a lot of inputs that we import from China. We normally spend $50k/quarter on investment (maintenance, new machines, etc.). But next quarter my short-term cost of Chinese inputs may double. It may make sense for me to front-load imports ahead of tariffs and defer as much investment as possible. I can't do that forever, so eventually the money will show up in the equation more-or-less where it would have otherwise. And on top of that, there are a bunch of confounding factors. Over time, imports also make domestic production more efficient, so shifting to less-efficient US inputs (or simply paying the tariff) will slow the rate of overall growth. And some costs are passed on as higher prices, which reduces demand, and therefore reduces growth. And importing goods also means exporting dollars, which affects exchange rates, and therefore affects exports as well. It's all interconnected. Calling it out when they reason from an accounting identity is really important, because it's a lot of what drives the misconceptions of Trump's protectionist advisors — they use the same reasoning in reverse to say that anything that reduces the trade deficit therefore increases GDP. But that's only true in an accounting sense! Reality takes more complex modeling, and has to account for all the interconnected pieces.
- ACow_Adonis 1y agoSee this article: Why do econ journalists keep making this basic mistake. https://www.noahpinion.blog/p/why-do-econ-journalists-keep-making https://www.noahpinion.blog/p/why-do-econ-journalists-keep-m... Source: am economist, and the writer of the blog is 100% correct. Reporting and commentary on GDP and economics stats is just generally bad.
- Aloisius 1y agoThank you. This makes far more sense.
- neilwilson 1y agoHowever Economists tend to struggle with flow effects, and Noah is no exception. Trade deficits are exports of money as static savings, and that reduces money in flow within the USD currency area. Deliberately, as that is how neo-mercantalism operates. The impact is on the income/expenditure sequence, not the aggregate figures - which are massaged by the reporting currency effect.
- throwaway2087 1y ago[flagged]
- piker 1y agoNone of those are negated by a lower GDP number to be fair.
- chrisco255 1y agoThis GDP print is mostly statistical fluke from excessive imports ahead of tariffs, way too early to be dancing on graves.
- deleted 1y ago[deleted]
- mdorazio 1y agoThe current White House press statements are often bullshit, but most of the above statement is at least directionally true. Unemployment is still at historically low levels and has been flat for a year. US Real Average Hourly Earnings are up, and the latest CPI data shows a 12-month inflation rate of 2.4% (not seasonally adjusted).
- NaOH 1y agoAs a new account, it'd probably be best to familiarize yourself with the site guidelines. For example, >Be kind. Don't be snarky. Converse curiously; don't cross-examine. Edit out swipes. >Omit internet tropes. >Please don't post shallow dismissals, especially of other people's work. A good critical comment teaches us something. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- deleted 1y ago[deleted]
- throwaway5752 1y agoWhile I think this is borderline in terms of following guidelines, it is much more concerning that the comment accurately quoted the source: https://www.whitehouse.gov/articles/2025/06/trump-effect-higher-pay-for-american-workers https://www.whitehouse.gov/articles/2025/06/trump-effect-hig... nickff: I agree it was borderline. My sentiment was closer to suggesting we look past tone to how shocking the content is. The human brain tries to normalize things, but a statement like this would have been unprecedented before 2016. People would have resigned or been fired, it would have been a scandal.
- joering2 1y ago[flagged]
- tonyedgecombe 1y ago>even with 24% VAT If you are buying your finished goods from Europe you shouldn't be paying VAT.
- unsnap_biceps 1y agoEven 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?
- Herring 1y ago[flagged]
- MangoCoffee 1y agoChinese manufacturers will split the fee with buyers when the tariff rate is modest and doesn't eat too much into their profit.
- spiderfarmer 1y agoThe rate isn’t modest so the straw already broke the camel’s back.
- grg0 1y ago[flagged]
- mindslight 1y agoYes, because we're supposed to believe that China having a surplus of manufactured goods constitutes a liability, and our need for manufactured goods constitutes a strength. So with our good strong healthy mentally competent leader, China will soon be paying us to take their products. Noted experts like Ron Vara have explained this in depth. </s>
- bamboozled 1y ago“It’s the media’s fault for reporting the numbers accurately” /s
- trhway 1y agoFoundation of US economy is domestic consumption. The current administration has significantly increased taxes - in the form of tariffs - on that consumption. So, the results are and are going to be as expected by any economy textbook. Additional obvious effect of tariffs is introducing friction, to say the least, into supply chains, similar to how pandemics did at the beginning with about the same result - inflation and loss of productivity. I personally have no panic here though - during my quarter of century here i noticed that US economy is extremely resilient and can take a lot of hits and damage, can even get knocked down, yet nothing can get it knocked out, and it would always come back even more roaring. It is though very hard on those who gets the sharp end of stick here, i'd wish that the society would get a bit more empathetic to them.
- gotoeleven 1y agoThe hope, at least, is that the tariffs will encourage the creation of more, better, jobs in the US through re-shoring. This would, in theory, also increase domestic consumption though the time frame is longer.
- trhway 1y ago>the tariffs will encourage the creation of more, better, jobs in the US through re-shoring that isn't possible for any production other than a primitive one. The modern production is very complicated, and in particular contains long lists of components, materials, tools, technological stages of production and engineering services. I.e. it is a pyramid with very wide base. Even large country like US is too small to maintain all what is required for any even moderately complicated product. Tariffs are kind of shrinking the pyramid's base - the result is lower pyramid so to speak. Of course, you and anybody welcome to bring counter-examples. >This would, in theory, also increase domestic consumption It would increase prices, and decrease productivity thus resulting in lower consumption.
- gotoeleven 1y agoDell used to make computers in the US. Then they moved manufacturing to China. You're saying Dell can't make computers in the US ever again? If the economic incentives are there then the supply chains can be (re-)built, right?
- dr-detroit 1y ago[dead]
- youngtaff 1y agoIt’s not just tariffs that are the issue… quite a few people from other countries have stopped coming to the US and are avoiding buying US products where possible
- qwerpy 1y agoOn the bright side maybe the national parks will stop being so overcrowded. Better take my kids to Yellowstone soon while this is still the case.
- platevoltage 1y agoBetter take your kids there before large chunks of it are sold to developers.
- randomNumber7 1y ago[flagged]
- Waterluvian 1y agoI’ve never seen this level of anti-American sentiment in Canada in my whole life. One thing I have my eye on is how hard consumer habits are to change. For example, American alcohol is simply gone from store shelves in Ontario. I can only imagine how much marketing work went up in the wind now that consumers have adapted. Returning the product to the market is probably not even the hard part.
- fakedang 1y agoA Canadian just died in ICE custody. I don't see any reason why Canadians should visit the US.
- protocolture 1y agoNo idea why you are getting downvoted. Embarrassment maybe, they cant stand to see the result of their inaction.
- wnevets 1y agoThe "bad news is actually good news" post are gonna be wild.
- pupppet 1y agoOr it’s Biden‘s economy until there’s a turnaround.
- deleted 1y ago[deleted]
- vaadu 1y ago[flagged]
- mcphage 1y agoWhat news source you do think is not a propaganda outlet?
- coombos 1y agoNPR. Al Jazeera. Reuters. BBC. But I already know you’re going to shit on those. People like you who ask that question aren’t asking in good faith.
- xracy 1y agoThis is needlessly combative. They were asking a different person this question... But a better question might be. "Why is apnews an unreliable source for this information." General distrust of a news outlet doesn't mean that the given article is false. I've seen some questionable shit from the BBC, though I generally trust them.
- gcommer 1y agoThe article never claims tariffs going into effect caused the Q1 issues.
- game_the0ry 1y agoGiven how many layoffs there have been and how much bad economic news has been coming out, I am quit surprised that we are not in a full blown technical recession. Even the DJI is touching historic highs and bond yields are down. I know I sound like an armchair economist, which is probably why I am on here ranting instead of on a tropical beach with super models name Brooke and Tiffany, eating lobster and beluga caviar, washing it all down with fine champagne. I can only assume that the last 5 years have been so solid for the economy that we have a long way down to go before we even begin to feel pain.
- toomuchtodo 1y agoStructural demographics. ~13k-14k workers leave the labor force every day, through a combination of retirement and death. Beat on the economy hard with these terminal interest rates and tariffs, demand for labor will still exceed supply. https://hn.algolia.com/?dateRange=all&page=0&prefix=false&query=labor%20shortages&sort=byDate&type=story https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...
- watwut 1y agoRecession is when the economy was in decline for three quarters and it were not three quarters yet.
- plugger 1y agoSorry, but the widely accepted definition of a technical recession is typically identified by two consecutive quarters of negative growth in real gross domestic product (GDP). Tuesday is the cut off date for the quarter and that will determine if the US is in technical recession.
- firesteelrain 1y agoYou're right that the textbook definition of a technical recession is two consecutive quarters of negative real GDP growth. That part’s clear. So technically, we can say “Q2 is over” on Tuesday, but we won’t be able to declare a recession (or not) until that data comes out. Unless you're inside the Fed or BEA models, we're all just speculating until then. The advance estimate drops on July 22 from the BEA. US is in a slight slowdown though
- jocaal 1y agohttps://polymarket.com/event/us-recession-in-2025?tid=1750980353462 https://polymarket.com/event/us-recession-in-2025?tid=175098... Polymarket puts 30% chance on a recession.
- consumer451 1y agoI have a heavy bias against that website, but it may be unfounded. It's been around for a while now, are there any 3rd party reliable studies showing how good polymarket markets are at predicting events?
- NewJazz 1y agoThey work well! Almost as well as Tarot.
- deleted 1y ago[deleted]
- yesco 1y agoRather than viewing it as a predictive system, I think it's more pragmatic to view it as a kind of poll. Basically it's a quick and dirty way to check general sentiment around certain topics.
- Balgair 1y agoI don't know about that one. The people that it 'polls' aren't that representative, leading to heavy bias. Which is fine, you can correct for that. It's just that I don't know their biases!
- consumer451 1y agoIt's a marketplace which is illegal to bet on in the USA, and commonly creates betting markets for US political events. What an interesting self-selection of users that creates.
- spprashant 1y ago
- blendo 1y agoA shrinking economy is likely to reduce emissions of greenhouse gases, won't it? Might the effect be detectable?
- NewJazz 1y agoDepends which areas shrink I guess. Not all product has the same carbon cost.
- like_any_other 1y agoNothing to worry about - life in the year 1990 was good, and that was with an inflation-adjusted GDP per capita just 59% of current (2023) value [1]. So we would need 82 of such 0.5% drops until things got as "bad" as in the year 1990. Because GDP is a meaningful quality of life indicator. [1] https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?locations=US https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?location...
- DiscourseFan 1y agoYes, but this data does not show that the "upper-middle class" (ie the professional class), which I imagine everyone here is a part of, has had significantly more gains than every other class aside from the very wealthy. For people with college degrees, and especially advanced degrees, that wealth has been realized quite clearly (and I don't know a whole lot of people in that position who are remotely interested in leaving the US, aside from those who are having trouble in academia and don't realize how easy it is to move to the private sector). For those with jobs in sectors that are less technologically advanced (who tend to have less education), thus less productive overall, their compensation is matched by the equivalent thereof in the global market, which is much more fiercely competitive than it was even 30-40 years ago.