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US economy shrank 0.5% in the first quarter, worse than earlier estimates

(apnews.com)
355 points Aloisius | 1 comments | 26 Jun 25 19:23 UTC | HN request time: 0.2s | source
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trhway ◴[26 Jun 25 21:48 UTC] No.44391823[source]▶
Foundation of US economy is domestic consumption. The current administration has significantly increased taxes - in the form of tariffs - on that consumption. So, the results are and are going to be as expected by any economy textbook.

Additional obvious effect of tariffs is introducing friction, to say the least, into supply chains, similar to how pandemics did at the beginning with about the same result - inflation and loss of productivity.

I personally have no panic here though - during my quarter of century here i noticed that US economy is extremely resilient and can take a lot of hits and damage, can even get knocked down, yet nothing can get it knocked out, and it would always come back even more roaring. It is though very hard on those who gets the sharp end of stick here, i'd wish that the society would get a bit more empathetic to them.

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gotoeleven ◴[26 Jun 25 22:49 UTC] No.44392225[source]▶
The hope, at least, is that the tariffs will encourage the creation of more, better, jobs in the US through re-shoring. This would, in theory, also increase domestic consumption though the time frame is longer.
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trhway ◴[26 Jun 25 23:06 UTC] No.44392314[source]▶
>the tariffs will encourage the creation of more, better, jobs in the US through re-shoring

that isn't possible for any production other than a primitive one. The modern production is very complicated, and in particular contains long lists of components, materials, tools, technological stages of production and engineering services. I.e. it is a pyramid with very wide base. Even large country like US is too small to maintain all what is required for any even moderately complicated product. Tariffs are kind of shrinking the pyramid's base - the result is lower pyramid so to speak.

Of course, you and anybody welcome to bring counter-examples.

>This would, in theory, also increase domestic consumption

It would increase prices, and decrease productivity thus resulting in lower consumption.

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gotoeleven ◴[27 Jun 25 00:24 UTC] No.44392759[source]▶
Dell used to make computers in the US. Then they moved manufacturing to China. You're saying Dell can't make computers in the US ever again? If the economic incentives are there then the supply chains can be (re-)built, right?
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1. acdha ◴[27 Jun 25 01:33 UTC] No.44393070[source]▶
How quickly did they move to China? Decades, right? Coming back takes that kind of timescale because everything needs to align – making PCs means that they need suppliers for every component, and those factories inputs, and logistics keeping factories’ production synchronized, and a lot of different skilled labor categories which aren’t trivially available. If you’re setting up a factory in the Midwest assembling parts from China, all you’re doing is ensuring that the results cost more and none of the key businesses are likely to come back because tariffs won’t make a factory competitive outside of the country.

You can encourage the whole thing to move but it needs to be a carefully considered long-term plan with strategic investments and ongoing investment. That’s the opposite of what we’re seeing now with tariffs changing every time an octogenarian gets cranky, and his party is trying to slash investments rather than grow them. No business is going to assume that any promise made will last for a business quarter, much less the years needed, and without some major funding commitments nobody is going to jump to line up tens of billions in financing.