Tuesday, July 10, 2018

U.S Economic Growth is Full of Beans

Paul Krugman
Paul Krugman explains:
According to early indications, recent U.S. economic growth was full of beans.

No, seriously. 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, possibly over 4 percent growth. If so, Trump will trumpet the news as proof that his economic policies are working — and some gullible journalists may go along with his claim.



  1. The Hair Apparent Trudeau assessed special new retaliatory tariffs on U.S. ketchup imports and then visited the Tomato Capital of Canada (35 miles SE of Detroit) on Canada Day. They love him for it. A vast mob of towns-people came out to great him in 93 degree heat.


  2. Just as that Canadian peninsula to the east of Michigan is one big flat earth farm, so is Michigan's "Thumb". A few weeks ago, local TV news went up there and found three "salt of the earth" soybean farmers. One said he hoped to make about a 1% profit on his vast plantings and needed revenue of $600,000 this year so he wouldn't lose the farm. He said he would probably survive if soybean prices stayed around $10 per bushel. But by this time, the new tariff talk had reduced the price to $8 per bushel. The farmers didn't seem very happy.

    Isn't it amazing how government central planners take care of us all?! They think of everything.