Once again: Imports do not subtract from GDP
Tariffs feature prominently in this year’s election debate. Although the Biden administration has put some pretty steep tariffs on some Chinese goods, Trump wants to go much further — he wants to put a 20% tariff on every single thing the U.S. imports, from any country. Trump seems to be a deep believer in the power of tariffs to solve almost any economic problem.
But why does Trump believe this? Matt Yglesias has been talking to some of Trump’s policy people from his first administration, and he has an answer. It’s because a whole lot of people think that imports subtract from GDP:
This is a very plausible explanation. Peter Navarro, one of Trump’s trade advisors, certainly believesthat imports subtract from GDP. But so do a whole lot of other people — including many people who don’t even support Trump.
So this is a good time for me to write a post explaining why this is a mistake. Despite what you may think you learned in econ 101, imports do not subtract from GDP — in fact, they’re not counted in GDP at all.
