But another major factor is that businesses freaking out about Trump’s trade war likely pulled forward some of their activity. That is, as Morgan Stanley chief U.S. economist Ellen Zentner puts it, they “doomsday prepped” by stockpiling raw materials, intermediate goods and finished products before tariffs raised costs on all those things.
Soybean exports surged, for example, as companies raced to beat retaliatory tariffs that went into effect this month. The jump in soybean exports alone probably added 0.6 percentage points to GDP growth in the second quarter, estimates Ian Shepherdson, chief economist at Pantheon Macroeconomics.
We should expect a reversal later this year, as buyers run down their existing inventory rather than place new orders.
In other words, perhaps a bit counterintuitively, the very thing that may make Trump think his trade war is working — unusually strong growth this past quarter — may be evidence it’s about to backfire. At the very least, uncertainty about trade barriers is not helpful for businesses trying to make longer-term decisions about how much and where to invest, plant, hire and so on.
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