In commenting on the recently released US GDP data, Robert Armstrong (“The US economy standing strong at the precipice”, Unhedged, May 1) is quite right to note that “imports are subtracted from GDP because they are not produced in the country”, but quite wrong to assert that the minus 0.3 per cent growth rate in the first quarter of 2025 “is an artefact of a massive surge in imports”.
For example, a US household buying European wine to avoid tariffs boosts consumption, but the corresponding import offsets it, leaving GDP unchanged.
The same applies to companies importing goods for inventory — investment rises, but so do imports, again netting out in GDP.
Had imports not surged in Q1 in anticipation of tariffs, consumption and investment would have been correspondingly lower, and GDP would still have shown a minus 0.3 per cent decline. Interpretations that treat imports as an automatic drag on output mistake an accounting identity for an economic mechanism.
Stefan Gerlach
Chief Economist, EFG Bank, Zurich, Switzerland;
Former Deputy Governor, Central Bank of Ireland, 2011-15
