Why do econ journalists keep making this basic mistake?

Economics journalists, like any writers, aren’t perfect. Perhaps in a previous age, people thought that everything they read in the news was exactly true; perhaps some still do. But reporting is a human activity, and humans make mistakes. In order to get the true story, you have to read multiple sources, and be skeptical of what you read — and even then, mistakes will slip through.

So the purpose of this post isn’t for me to be a pedantic know-it-all, or to insult the economics journalism profession as a whole, or to call out specific writers. But there’s one simple, elementary mistake that almost all econ reporters make very consistently, over and over. And unlike most mistakes, this one has probably had serious negative consequences for American economic policymaking. Therefore I feel like I have to speak up here, and express my frustration a little.

The mistake econ reporters are making is claiming that imports subtract from GDP. Imports do not subtract from GDP. And yet again and again, economics journalists say that they do.

This week, U.S. GDP data for the first quarter of 2025 (January through March) was released. The data showed that the U.S. economy shrank at an annualized rate of 0.3%. But almost every economics journalist and columnist reported that this decline was due to a surge of imports, as American companies rushed to stock up on foreign-made goods ahead of Trump’s tariffs.

For example, here is the Wall Street Journal:

[T]he main driver of the first-quarter contraction was Trump’s trade war…Businesses rushed to get ahead of tariffs…Imports rose at the fastest pace since the third quarter of 2020…Imports subtract from the Commerce Department’s calculation of GDP, since they represent spending on foreign-made goods and services. [emphasis mine]

And here is Bloomberg:

The GDP figures showed imports surged an annualized 41.3% — the biggest advance in nearly five years. Because these goods and services aren’t produced in the US, they are subtracted from GDP. [emphasis mine]

And here is CNBC:

Imports subtract from GDP, so the contraction in growth may not be viewed as negatively given the potential for the trend to reverse in subsequent quarters. [emphasis mine]

And this is the Washington Post:

This economic slowdown came primarily from a dramatic increase in imports — which count against GDP — as businesses rushed to purchase foreign goods ahead of President Donald Trump’s promised tariffs. [emphasis mine]

All of these writers — and many, many more that I didn’t cite here — got it wrong. Imports simply do not subtract from GDP. That is not how GDP works.

Last September, I wrote a post explaining why imports don’t subtract from GDP. I don’t want to just write that post all over again, so here it is:

Once again: Imports do not subtract from GDP Noah Smith · September 28, 2024 Read full story

The short version of the story is this: GDP is a measurement of everything produced within a country’s borders. Imports are produced outside a country’s borders. So imports don’t add to or subtract from GDP. Imports simply aren’t counted in GDP at all.

Let’s think about some examples. Suppose an American buys a TV made in China for $1000. Remember that GDP can be calculated as the sum of consumption, investment, government purchases, and net exports:

GDP = Consumption + Investment + Government Purchases + Net Exports

When the American buys the $1000 TV from China, U.S. consumption goes up by $1000. And U.S. net exports go down by $1000, since “net exports” means exports minus imports. The increase in consumption exactly cancels out the fall in net exports. So the total contribution of the imported TV to U.S. GDP is zero.

Let’s take another example, which is more like what actually happened in Q1. Suppose an American company, Best Buy, decides to buy a Chinese TV and put it in a warehouse, because it knows that tariffs are coming soon. That purchase counts as inventory investment. So investment goes up by $1000. And just like in the previous example, net exports go down by $1000. The two cancel out, and the total contribution of the imported TV to U.S. GDP is zero.

In other words, if a bunch of U.S. companies were trying to stock up on imports ahead of the tariffs, that should register as both an increase in (inventory) investment, and as a decrease in net exports. The two should exactly cancel out. Those imports should not subtract from GDP, since they add to investment even as they also subtract from net exports.

Here’s a simple analogy: Does putting on shoes make you lose weight? No, it doesn’t. And yet when you weigh yourself with your shoes on at the doctor’s office, and you want to know your actual body weight, you subtract the weight of your shoes afterwards. Imports are to GDP what shoes are to your weight on the scale at the doctor’s office — just something superfluous that gets added in for the sake of measurement convenience, and which has to be netted out again later to get the true number.

Putting on heavier shoes doesn’t make you a thinner person, and importing more goods from abroad doesn’t make your country’s economy any smaller.

So it’s just not true that America’s economy shrank in Q1 because “imports are subtracted from GDP”. That’s false. Every time an economics reporter writes those words, it’s an error that should be corrected.

(I should note that The Economist, alone out of all the major news outlets I looked at, got the story completely correct. Good job, guys!)

Why does almost everyone keep getting this wrong? And why does it matter?

Why does almost every economics writer get this wrong? The simplest answer is herd behavior.

Back when IBM was the biggest, most important tech company, there was a saying in stock trading: “Nobody ever gets fired for buying IBM.” Similarly, practically everyone in econ journalism writes “Imports subtract from GDP,” so if you write that too, no one is going to give you grief about it. There’s safety in numbers; you won’t be singled out.

It’s easy to trace the origins of the mistake, too. The basic formula for GDP, which government agencies report and every econ writer knows, is just GDP = C + I + G + NX. So when government agencies report this breakdown, it’s pretty much automatic for econ reporters to write “Consumption increased by this much, investment by that much”, and so on. So if the trade deficit widens, it’s just standard practice to say “Net exports contributed negatively to GDP this quarter.” You’re just dutifully reading off each of the standard components.

And because net exports are just exports minus imports, it’s the tiniest of hops from saying “Net exports subtracted 5% from GDP growth” to saying “Imports subtracted 5% from GDP growth”. And if you say it that way, it must mean imports subtract from GDP, right? Right?

In fact, I can’t entirely blame econ journalists for making this mistake, because sometimes the government makes it too!

Most of the time, the people working for the government get it right. For example,