What I mean is that imports are subtracted from the GDP.
GDP = Consumption + Investment + Gov’t Spending + (exports - imports).
Reduce imports, if you can buy the same stuff here in the US *even at the same price*, you increase GDP. If the price increases for necessary items made in the US, you’ll see the “consumption” portion go up, which also increases GDP.
As I said, I’m failing to see a problem in this tire trade restriction.
We still make plenty of tires - and plenty of steel. The idea that “we don’t make anything here anymore” is true only for a limited set of consumer schlock crap. We still make (or have the ability) to make plenty of stuff here in the US. We manufacture more stuff than anyone else, as a matter of fact.
The issue with China and our current account deficit, however, threatens the future of the US economy. The situation where consumer spending needs to be subsidized with easy lending kept that way by the Chinese buying our debt at low yields is simply not sustainable, and the longer we put off the reckoning, the worse it is going to be.
I think one issue is that much of the investment and returns in your equation come from overseas production and foreign subsidiaries of US companies.
For example, tires. Goodyear. They have a massive factory in Dalian (in the North, where the better aluminum smelters are). They make tires for the Asian, EU, and US markets. Would tires made by Goodyear - a US company - in China be subject to tariffs when brought back to the US?
If so, then you will reduce the profits and sales of Goodyear China operations.
It’s not a simple “take from here and you will get more there” type of game, because of the nature of business. Tariffs will actually hurt US companies who have wholly owned manufacturing plants overseas, thereby reducing investment AND consumption.
What will happen, is the same thing that happens every time a debtor country goes critical mass. We will inflate. Big time!
This is what China, and japan are concerned about but it will happen slowly like a boiled frogs.
It's happening now. Most people just can't see it.
In a few months you should hear the first complaints about prices in the grocery store. I see that now, and the government is cooking the data to hide it. One number that you will see benefit will be GDP!
I would not worry too much about GDP. You are right about import/export ratios being off, but as long as we are importing so much energy, and inflating, we will never have that under any sort of balance or control. We can't make products cheaply anymore so we won't be doing that either.
What we have left is intellectual property, Financial and heavy stuff but that is under tax and regulation assault by Obama and company.
If you think I am being a bit dour, you are correct. I have very little hope that my country will survive this without losing a great deal of our standard of living. We will be sent back to the fifties.
Look for the double dip recession to begin in the first quarter of next year, maybe a bit sooner. We will be in this recession for a long time, and tariffs will be one of many issues. I expect a trade war to break out. I am also waiting for the clunker cars to start showing up in the bank parking lots with "assume Note" signs on them. It won't be long. All this stimulus crap is going to hit the fan.
Add this to the horrible management we already see coming, and the political unrest, and you have a real danger of total and complete breakdown. Just the thing that fascist government always seem to cause.
No, I'm not too worried about the GDP numbers anymore. I was, about six months ago but no longer. The numbers don't reflect growth anymore. On top of that, the rest seem out of the ball park and un-real. They don't reflect reality and what the companies are seeing in their markets. Oh they say they might see slow growth ahead.
What they really see is a better quarter due to low inventories, payment floats and savings from layoffs. So called productivity went through the roof.
This is all a sign that there is a storm coming.