Following a 0.6% decline in the first quarter due to the effects from President Donald Trump’s trade battles, the US gross domestic product, or the country’s output of goods and services, recovered in the spring, the Commerce Department announced Thursday. The department had earlier projected a 3.3% growth rate for the second quarter.
A spike in imports, which are deducted from GDP, was the primary reason of the first-quarter GDP decline, the first economic downturn in three years, as companies scrambled to purchase goods before Trump could put broad tariffs on them. In the second quarter, that trend reverted as anticipated: imports decreased at a rate of 29.3%, increasing April-June growth by over 5 percentage points.
However, orthodox economists, whose opinions Trump and his advisors disagree with, claim that his tariffs will hurt the economy by increasing costs and decreasing the productivity of protected US businesses. They point out that American importers pay tariffs and attempt to pass the expense on to their clients by raising prices. Consequently, even while tariffs have had a relatively small effect on pricing thus far, they have the potential to cause inflation.
Businesses are perplexed by Trump’s erratic approach to enforcing the tariffs, which has caused a significant slowdown in hiring. He has announced and suspended the duties before introducing new ones.
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