How much of the forthcoming announcement of an upward bump in GDP growth in the second quarter is due to people battening down the hatches for Trump's trade war, and will be reversed over the course of the next year? That is what we are all trying to estimate right now: Paul Krugman: Trump, Tariffs, Tofu and Tax Cuts: "More than half of America’s soybean exports typically go to China, but Chinese tariffs will shift much of that demand to Brazil, and countries that normally get their soybeans from Brazil have raced to replace them with U.S. beans. The perverse result is that the prospect of tariffs has temporarily led to a remarkably large surge in U.S. exports...
...which independent estimates suggest will add around 0.6 percentage points to the U.S. economy’s growth rate in the second quarter. Unfortunately, we’ll give all that growth back and more in the months ahead. Thanks to the looming trade war, U.S. soybean prices have plummeted, and the farmers of Iowa are facing a rude awakening. Why am I telling you this story? Partly as a reminder of the unintended consequences of Donald Trump’s trade war, which is going to hurt a lot of people, like Iowa farmers, who supported him in 2016. In fact, it looks as if the trade war is in general going to hurt Trump’s supporters more than his opponents. Meanwhile, Trump’s trade war will benefit some unexpected parties. Was making Brazil great again part of his agenda?
>But mainly I offer the parable of the soybeans as a warning against what’s going to happen later this month, when the advance estimate of second-quarter G.D.P. comes in. The headline number is probably going to look good.... You need to know is that (a) quarterly fluctuations in growth are mainly noise, telling you very little about long-term economic prospects, and (b) more fundamental indicators show that Trump’s main policy achievement to date, last year’s tax cut, is basically delivering none of what its backers promised.... Pay little or no attention to short-term growth wobbles, which can be driven by transitory stuff like the reshuffling of world soybean trade...
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