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REDDIT

Is it possible that import front-running actually artificially buoyed GDP in Q1?

B
May 3, 2025 · 02:53

So I've been digging into the mechanics of how GDP works a little bit more in the wake of all this tariff stuff. Follow me here for a second.

# Example 1:

Apple wants to front-run the tariffs and flies in a shit-ton of iphones, each costing $1000 (just to make the math easy).

The way GDP works is that the import cost (M) is offset by the addition to inventory - or investment (I).

The net effect of GDP, here is zero: GDP = +1,000 (I) -1,000 (M) = 0

Right off the rip, this puts to bed the idea that front-running imports is what drove down GDP. It has no effect.

But, it doesn't have zero effect. Because we need to include logistic costs. That iPhone was flown into an airport. The airport charges fees to the shipper. Laborers need to get paid for unloading the plane and loading trucks. Truck drivers need to get paid. Fuel is consumed. That $1000 base price of the iphone might have just jumped to $1,100 (probably less, but we'll run with it).

So now, GDP = +$1,100 (I) - $1,000 (M) = +$100

Front running imports probably has an upward bias on GDP here.

It doesn't stop there.

# Example 2

I'm having trouble coming up with a decent example, but say I'm a ball point, clicky, pen manufacturer, and I import my springs from china. I ordered a bunch of springs in March and I went ahead and built a shipment of pens to store in inventory.

Say that the springs are only 10% of my unit costs at $1 per hundred pens. The other $9 is used to locally manufacture the rest of the pen.

Here the GDP equation looks like this: GDP = +$10 (I) - $1 (M) = +$9

# TL;DR

In both of these scenarios, the pull forward in imports actually pulled forward future GDP and artificially lifts current GDP.

If this is indeed the case, I think it's possible we see the real slowdown in the back half of the year when tariffs are well in effect.