Business Review Board / July 27, 2018

Grand Domestic Product — 2Q GDP Growth Hits 4.1%

Trump’s regimen of tax cuts and deregulation is yielding solid economic growth.

This isn’t exactly the news Sen. Bernie Sanders (Socialist-VT) and his young henchwoman Alexandria Ocasio-Cortez wanted to hear. Today, the Commerce Department apprised us of second-quarter GDP figures, and it’s encouraging all the way around. “Gross domestic product grew at a solid 4.1 percent pace in the second quarter, its best pace since 2014, boosting hopes that the economy is ready to break out of its decade-long slumber,” CNBC reported.

Elevated consumer spending, a bump in business investment, more exports, and more government spending are all being credited, though we’d happily take less government spending. Even better, CNBC says, “In addition to the strong second quarter, the Commerce Department revised its first-quarter reading up from 2 percent to 2.2 percent.”

Interestingly, The Washington Post reports, “While the vast majority of economists warn that Trump’s trade war will hurt U.S. growth, they say it temporarily boosted growth in the spring as foreign firms rushed to make purchases before the tariffs took effect. Exports added more than a percentage point to growth, something that hasn’t happened in years and is unlikely to repeat. Soybean exports exploded in the second quarter, as customers in several countries scrambled to snatch up supplies before new foreign taxes on U.S. soybeans went into effect, part of a broad retaliation against Trump’s tariffs on a range of foreign products.”

Yet it’s worth reminding that Donald Trump’s trade blueprint appears to be paying off. Part of his pending agreement with the EU is to have Europe import more U.S. products. This inevitably creates a dilemma for China, which will feel additional pressures to broker a trade compromise. So while a fear-induced increase in exports may have helped GDP in the second quarter, additional concessions will only further help the economy down the road.

The consensus among the “experts” is that Trump’s “trade wars” will fail, because these coastal elites have already determined how it will end. But if major compromises are continuing to be made, the outlook for the economy will only brighten. That’s not to say future GDP won’t be moderated, as some surmise. It may very well drop. Yet the foundation seems to be strong and ready to be built upon. That’s why President Trump responded to today’s news by saying, “We’re going to get a lot higher than these numbers and these are great numbers. We are now on track to hit an average GDP annual growth of over 3 percent and it could be substantially over 3 percent.” He’s right to be optimistic. The better our economy is, the less the anti-capitalist rhetoric of the Democratic Socialists will resonate in the midterms.

(Edited.)

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