Third Quarter of the Game

GDP numbers are in and there is this:  The US economy grew at a solid 3.5% for the third quarter.  Nonetheless, it was the largest negative contribution to GDP growth for trade in more than three decades.  In the second quarter of 1985, trade subtracted 1.91 points.  Trump trade policy dragged down GDP growth by 1.78 points.  In other words, if trade were a net neutral - neither adding to nor subtracting from GDP growth - third-quarter GDP growth would have been a stunning 5.3%! 

To be fair - the tariffs may have contributed in such a way that the GDP number wasn’t weaker than expected.  Just like the shipping of soybeans - which spiked in the second quarter - inventories swelled in the third quarter as businesses imported goods before they were hit by tariffs.  This may have added a couple of percentage points to the GDP growth figure.  In any event, the stockpiling of inventory about to be taxed is a temporary phenomenon. 

Stay tuned to watch and see if the Trump World trade skirmish erupts into a full-throated trade war.  So far the Republican trade taxes are dampening economic growth.

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