Abdullah- You are of course absolutely correct. But... (sorry to point out the big complication) when parts are made inside the US, they are not included in GDP, because they are part of a later complete unit sold to end-users. HOWEVER, when parts are imported, they are counted as imports -- they are added to Consumption if they become part of a product sold in the same year, or to Investment if they are added to inventory but not put in a product that is sold in the same year -- then they are subtracted as part of Net Exports (imports minus exports). Now this makes sense on the face of it, because the part is a foreign-made portion of a product. But, one thing is the sheer volume of parts imported to the US. Since globalization and very low tariff levels, the volume of parts imported to the US has accelerated. Here is a site that shows car parts by source country: https://automotiveaftermarket.org/automotive-parts-imports-country/#:~:text=Top%20countries%20for%20automotive%20parts,Japan%20US%2415%2C796%2C292%2C742%20(8%25). But here is the problem: "Automobiles and their parts rarely cross the U.S. border once. Parts like engines, transmissions, or other automotive components potentially crossing the U.S.-Canada and U.S.-Mexico borders up to seven or eight times before being assembled into a finished vehicle." (https://www.csis.org/analysis/stacking-effect-trump-administrations-auto-tariffs) The result is that "imports" can be counted up to 7 or 8 times! That plays Hell with trade stats. It doesn't really matter so much if tariffs are zero or negligible, but it is possible that this could lead to the impression that we are nominally in a recession because of high "Imports", when all we are doing in practice might be counting the same engines multiple times and duly subtracting each iteration from GDP...
I definitely have been a weing this a lot more. I not surprised though sadly there are a lot of lay men that think they deeply understand economics but dont know the logic behind basic principles. There is a definite need to improve economic literacy.
Abdullah- You are of course absolutely correct. But... (sorry to point out the big complication) when parts are made inside the US, they are not included in GDP, because they are part of a later complete unit sold to end-users. HOWEVER, when parts are imported, they are counted as imports -- they are added to Consumption if they become part of a product sold in the same year, or to Investment if they are added to inventory but not put in a product that is sold in the same year -- then they are subtracted as part of Net Exports (imports minus exports). Now this makes sense on the face of it, because the part is a foreign-made portion of a product. But, one thing is the sheer volume of parts imported to the US. Since globalization and very low tariff levels, the volume of parts imported to the US has accelerated. Here is a site that shows car parts by source country: https://automotiveaftermarket.org/automotive-parts-imports-country/#:~:text=Top%20countries%20for%20automotive%20parts,Japan%20US%2415%2C796%2C292%2C742%20(8%25). But here is the problem: "Automobiles and their parts rarely cross the U.S. border once. Parts like engines, transmissions, or other automotive components potentially crossing the U.S.-Canada and U.S.-Mexico borders up to seven or eight times before being assembled into a finished vehicle." (https://www.csis.org/analysis/stacking-effect-trump-administrations-auto-tariffs) The result is that "imports" can be counted up to 7 or 8 times! That plays Hell with trade stats. It doesn't really matter so much if tariffs are zero or negligible, but it is possible that this could lead to the impression that we are nominally in a recession because of high "Imports", when all we are doing in practice might be counting the same engines multiple times and duly subtracting each iteration from GDP...
I definitely have been a weing this a lot more. I not surprised though sadly there are a lot of lay men that think they deeply understand economics but dont know the logic behind basic principles. There is a definite need to improve economic literacy.
EVERYONE should learn about Simeon Kuznets! And that he thought that the idea that GDP conveys national well-being is untrue...