| I’m Ben Holland, an economics editor in Washington. Today we’re looking at trade and GDP. Send us feedback and tips to ecodaily@bloomberg.net. And if you aren’t yet signed up to receive this newsletter, you can do so here. - Donald Trump acknowledged that his tariff program had a perception problem and posed a significant political risk, but he sounded determined to push on.
- Japan’s central bank left its interest rate unchanged, while Colombia unexpectedly cut its benchmark by 25 basis points.
- South Korea’s export growth stalled in April in a worrisome sign for the trade-driven economy.
The US economy began 2025 with a contraction — the first since 2022 — driven almost entirely by trade. US businesses rushed to frontload imports before President Trump’s tariffs kicked in; the external deficit ballooned as a result; and that counts as a drag, the way GDP is calculated. A long-run analysis suggests trade is the most volatile — as well as being the smallest – of the four components that add up to what’s known as the demand-side version of GDP. That’s an effort to measure the economy based on who purchases the goods and services it produces. Broadly speaking there are only four possible buyers: US households, US businesses, the US government, or foreigners. In the first three of those categories, the long-run trends are clear. The government’s share (which doesn’t include transfer payments like Social Security) was shrinking for decades before Elon Musk and DOGE came along, and is now near a record low. The business share hit an all-time high in early 2025, and the household share wasn’t far off a record, too. That leaves foreigners, or “net exports” as they’re called in GDP math. As it happens, trade was also the main culprit last time the economy shrank in 2022, though the reasons back then were entirely different: Consumers and businesses were snapping up imports as the economy bounced back from the pandemic. The time when trade was the biggest drag to the economic output was in the years right before the Great Financial Crisis, when America’s external deficit had been blowing out for more than a decade. The 2025 figure came close to that. But most economists expect a rapid reversal this time. America’s pre-tariff splurge on foreign goods is already over, with imports getting more expensive and cargo shipments slowing down. In the coming quarters, trade likely won’t be the main worry for GDP-watchers — though they'll have plenty of alternatives. Don’t Miss the Latest Trumponomics Podcast | What does India stand to gain from the US trade war with China? Host Stephanie Flanders, Bloomberg’s head of government and economics, speaks about this first potential deal tied to Trump’s trade war with senior editor Chris Anstey and reporter Shruti Srivastava, as well as Bloomberg Economics senior India economist Abhishek Gupta. Listen here and subscribe on Apple, Spotify, or wherever you get your podcasts. The Best of Bloomberg Economics | - The Trump administration asked the US trade court to reject a lawsuit by small businesses challenging the president’s global tariffs.
- Prices from some of the most popular sellers of made-in-China goods suggest US shoppers will pay a major portion of the bill.
- Bank of Canada officials considered cutting rates at their April meeting, but decided to wait for more information due to trade uncertainty.
- The European Union is planning to share a paper with the US next week that will propose lowering trade and non-tariff barriers.
- Mexico’s economy narrowly dodged a recession in the first quarter. Consumers are cutting back on cell service, coffee, cigarettes and tequila.
- The IMF downgraded its growth forecasts for oil exporting countries in the Middle East and North Africa and told Egypt to tread carefully as it lowers rates.
Executive orders. Trade wars. Elon Musk and DOGE. Trump’s second term has been nothing short of eventful. Bloomberg reporters recap his first 100 days in a Live Q&A on May 1 at 11 a.m. EDT. Tune in here. With the US signaling it wants trading partners to raise barriers against China, and Beijing warning against any such thing, some economists are now gaming out what extreme scenarios might look like. Jimena Zuniga at Bloomberg Economics has done that for Latin America. Zuniga wrote in a note Wednesday that “a world without US trade would be particularly hard on Mexico” — which up to now has relied on its northern neighbor as a key source of demand. Damage to South America, however, would be limited by that continent’s natural resources suddenly becoming more valuable without the US in the picture, she wrote. “These key economic factors are likely to influence Latin American countries’ alignments as the trade war unfolds,” Zuniga wrote. “The US might be able to convince Mexico to follow its lead in attempting to isolate China, but few South American countries would be inclined to do so.” - Read the full note on the Bloomberg terminal here.
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