# GDP boosted by produce sales in anticipation of tariffs **URL:** \ **Category:** Factual Questions\ **Created:** [July 29, 2018, 2:23am UTC](https://boards.straightdope.com/t/gdp-boosted-by-produce-sales-in-anticipation-of-tariffs/818755 "2018-07-29T02:23:37Z")\ **Posts on this page:** 10\ **Page:** 1
**Author:** ![CookingWithGas](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cookingwithgas/32/485_2.png) [@CookingWithGas](https://boards.straightdope.com/u/CookingWithGas)\ **Post date:** [July 29, 2018, 2:23am UTC](https://boards.straightdope.com/t/gdp-boosted-by-produce-sales-in-anticipation-of-tariffs/818755/1 "2018-07-29T02:23:37Z")
I thought I knew how the GDP was calculated, but the current analysis of the latest GDP figures confuses me. Remember, the P stands for Product (not Sales). Analysts say there was an increase in exports, such as soybeans, in anticipation of tariffs that will kick in later this year. But the farmers didn’t \*produce \*more soybeans, they just _exported_ more. You can’t increase production of crops on a moment’s notice. So if they had not exported them, they would have been held in inventory to sell later in the year, and considered investment–also included in GDP. Or am I wrong there? So why does an increase in exports lift GDP even if the goods that were exported were going to be produced anyway? ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [July 29, 2018, 4:28am UTC](https://boards.straightdope.com/t/gdp-boosted-by-produce-sales-in-anticipation-of-tariffs/818755/2 "2018-07-29T04:28:08Z")
> **[Gross domestic product | Determining gross domestic product (GDP)](https://en.wikipedia.org/wiki/Gross_domestic_product#Determining_gross_domestic_product_(GDP))** > > GDP can be determined in three ways, all of which should, theoretically, give the same result. They are the production (or output or value added) approach, the income approach, and the speculated expenditure approach. It is representative of the total output and income within an economy. > The most direct of the three is the production approach, which sums the outputs of every class of enterprise to arrive at the total. The expenditure approach works on the principle that all of the product must ... See section 3 for the different ways to calculate GDP, in particular 3.3 the “expenditure” method. ---
**Author:** ![CookingWithGas](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cookingwithgas/32/485_2.png) [@CookingWithGas](https://boards.straightdope.com/u/CookingWithGas)\ **Post date:** [July 29, 2018, 12:34pm UTC](https://boards.straightdope.com/t/gdp-boosted-by-produce-sales-in-anticipation-of-tariffs/818755/3 "2018-07-29T12:34:17Z")
> [@Riemann](#): > > [Gross domestic product - Wikipedia](https://en.wikipedia.org/wiki/Gross_domestic_product#Determining_gross_domestic_product_(GDP)) > > See section 3 for the different ways to calculate GDP, in particular 3.3 the “expenditure” method. This explanation says, “In the case where a good is produced and unsold, the standard accounting convention is that the producer has bought the good from themselves.” So if a farmer produces soybeans but doesn’t sell them, it is still counted as part of GDP. So what’s the difference, in GDP, between growing them and storing them vs. growing them and exporting them? ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [July 29, 2018, 1:15pm UTC](https://boards.straightdope.com/t/gdp-boosted-by-produce-sales-in-anticipation-of-tariffs/818755/4 "2018-07-29T13:15:02Z")
This method (for obvious reasons) excludes intermediate consumption, i.e. items purchased by an intermediary to resell (e.g. a wholesaler who will resell at retail). Following this reasoning, I think the situation you have quoted “where a good is produced and unsold, the standard accounting convention is that the producer has bought the good from themselves” would only apply to balance the books for goods that are _never_ ultimately sold. It would not apply to goods that are stored by a producer pending sale. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [July 29, 2018, 1:33pm UTC](https://boards.straightdope.com/t/gdp-boosted-by-produce-sales-in-anticipation-of-tariffs/818755/5 "2018-07-29T13:33:09Z")
ETA: you will see from the Wiki article that “change in inventory” is an item in the “production approach” method to GDP calculation, but not the “expenditure approach”. ---
**Author:** ![Corry\_El](https://avatars.discourse-cdn.com/v4/letter/c/ecae2f/32.png) [@Corry\_El](https://boards.straightdope.com/u/Corry_El)\ **Post date:** [July 29, 2018, 4:08pm UTC](https://boards.straightdope.com/t/gdp-boosted-by-produce-sales-in-anticipation-of-tariffs/818755/6 "2018-07-29T16:08:42Z")
> [@CookingWithGas](#): > > I thought I knew how the GDP was calculated, but the current analysis of the latest GDP figures confuses me. Remember, the P stands for Product (not Sales). > > Analysts say there was an increase in exports, such as soybeans, in anticipation of tariffs that will kick in later this year. But the farmers didn’t \*produce \*more soybeans, they just _exported_ more. You can’t increase production of crops on a moment’s notice. So if they had not exported them, they would have been held in inventory to sell later in the year, and considered investment–also included in GDP. Or am I wrong there? > > So why does an increase in exports lift GDP even if the goods that were exported were going to be produced anyway? Your intuition is largely correct, under the assumption a) there was not enough time to actually grow more crops in response to oncoming tariffs than otherwise would have been grown and b) the crops once harvested were sold to some intermediate buyer. In that case, which is probably representative of what actually happened in many cases, the beans would either show up as increase in inventory (+GDP) or export (+GDP) and the looming tariffs would not increase GDP. In fact this is partly backed up in the actual situation by the drag on GDP in the latest quarter from a reduction of inventories (though a reduction of inventories of everything in a huge economy only a tiny % of which are soybeans and small % any ag products). The only way anticipation of tariffs could actually boost GDP is by reversing either of those assumptions a) some crops actually grown, which would not have been, due to anticipating the tariffs, doesn’t seem likely in that short a period or b) the already produced crops were held in some form of inventory that does not show up in GDP inventory statistics. For example if farmers held them in their own silo’s it probably would not, as opposed to selling them to a grain dealer or even a local farmer’s co-op where it probably would show up. In that case the farmers’ self storage would not have shown up as increase in _recorded_ inventories, and the quick export of the beans brings forward some otherwise future GDP. In reality there are probably a significant % of both cases, some a wash between inventory changes recorded in GDP and exports, some a net boost of exports v inventory changes that don’t get recorded in GDP. But the fact that general or even nominally financial media ignores the case where it would be a wash doesn’t mean that case is much less common Their reporters are generally not that well informed about that kind of thing, and likely to take the position ‘we stand by our story’ as long as somebody who should know better is their source. As to method of calcing GDP, all accepted methods come out the same (assuming the underlying info is correct), just counting it different ways. If an explanation is correct under one method, it also is under any other valid method. ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [July 30, 2018, 12:38am UTC](https://boards.straightdope.com/t/gdp-boosted-by-produce-sales-in-anticipation-of-tariffs/818755/7 "2018-07-30T00:38:04Z")
Forgive my ignorance of farm economics, but don’t most farmers (large farmers at least) use commodities futures markets to get themselves a guaranteed price for the season? Aren’t the futures traders the ones taking the losses due to tariffs this year? Naturally, the tariffs will be priced into the markets next year. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [July 30, 2018, 12:48am UTC](https://boards.straightdope.com/t/gdp-boosted-by-produce-sales-in-anticipation-of-tariffs/818755/8 "2018-07-30T00:48:12Z")
> [@Corry\_El](#): > > As to method of calcing GDP, all accepted methods come out the same (assuming the underlying info is correct), just counting it different ways. If an explanation is correct under one method, it also is under any other valid method. Sure, but the issue that we’re seeing here is timing mismatch between the different methods. Under the expenditure method, earlier export sales means higher GDP now; with a corresponding drop in GDP later if total production remains the same. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [July 30, 2018, 1:04am UTC](https://boards.straightdope.com/t/gdp-boosted-by-produce-sales-in-anticipation-of-tariffs/818755/9 "2018-07-30T01:04:15Z")
> [@Alley\_Dweller](#): > > Forgive my ignorance of farm economics, but don’t most farmers (large farmers at least) use commodities futures markets to get themselves a guaranteed price for the season? Aren’t the futures traders the ones taking the losses due to tariffs this year? Naturally, the tariffs will be priced into the markets next year. Farmers may choose to hedge by selling futures; but similarly, consumers of soybeans who need to buy later in the year may choose to hedge by buying futures. There’s no reason to assume that speculative traders are naturally positioned long. ---
**Author:** ![Corry\_El](https://avatars.discourse-cdn.com/v4/letter/c/ecae2f/32.png) [@Corry\_El](https://boards.straightdope.com/u/Corry_El)\ **Post date:** [July 30, 2018, 2:39pm UTC](https://boards.straightdope.com/t/gdp-boosted-by-produce-sales-in-anticipation-of-tariffs/818755/10 "2018-07-30T14:39:17Z")
> [@Riemann](#): > > Sure, but the issue that we’re seeing here is timing mismatch between the different methods. Under the expenditure method, earlier export sales means higher GDP now; with a corresponding drop in GDP later if total production remains the same. If there were recurrent timing mismatches then we couldn’t say the methods give the same answer. But they do. And the Bureau of Economic Analysis (the govt body which calculates US GDP using BLS data) does it all three ways to see that they agree. But anyway the BEA _presents_ GDP data in the expenditure form (Y = C + I + G + (X − M) ) so it’s most convenient to speak of it that way referring to their results. [https://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm](https://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm) In that form of presentation assuming all info is correct, a draw down in inventories of soybeans to export them and beat a tariff deadline would not affect GDP. ‘I’, investment, includes change in inventories, so you’d have the same drop in I as increase in X. The only way a rush to export soybeans would affect GDP is if a) there’s enough time to _grow_ soybeans that otherwise would not have been or only later would have been grown or b) the inventory statistics don’t correctly capture crops harvested and available for sale, although they are supposed to include that. Again, the fact that general or even financial media people say a rush to beat ag tariffs blipped GDP doesn’t mean much. They often don’t know what they are talking about.