Summary: Imports do not subtract from GDP because they aren’t counted in the GDP calculation at all. Instead, imports can affect GDP indirectly, sometimes increasing it and other times decreasing it, depending on various factors. Many people mistakenly believe imports hurt GDP due to confusion in economic teaching and the complex effects of trade policies.
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. (View Highlight)
GDP = all the stuff we produce
Imports aren’t produced in the country, so they just don’t count in the formula above. (View Highlight)
GDP = Capital goods we produce for companies + Capital goods we produce for consumers + Stuff we produce for the government + Exports
This is a perfectly good formula for GDP. But instead, here’s what economists do. They add imports to the first three categories, and then subtract them again at the end (View Highlight)
trying to protect America’s steel industry with tariffs ended up exacerbating the Rust Belt. (View Highlight)
Tariffs on intermediate goods generally hurt GDP more than tariffs on final goods — steel tariffs are more likely to hurt regular Americans than tariffs on cars. (View Highlight)
The global economy is a highly complex machine of cross-border supply chains; we’re not the stand-alone economy we (sort of) were back in World War 2, and we can’t return to that level of self-sufficiency without making ourselves much poorer. (View Highlight)