US Tariffs Reduce Imports, Increase GDP, Monopolize Wealth in AI Stocks, and Decline in Manufacturing: 'Predatory Capitalism'

US Tariffs Reduce Imports, Increase GDP, Monopolize Wealth in AI Stocks, and Decline in Manufacturing: 'Predatory Capitalism'

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While the US economy is experiencing a GDP increase and a decline in manufacturing due to reduced imports from Trump's tariffs, South Korea appears to be a testament to a new type of "predatory capitalism" where the wealthy monopolize wealth in the stock market through investments in AI data centers.

The paradox of the US economy stems from the abnormality in which a "reduction in imports" is clearly evident in trade, which is then reflected in a "growth in GDP" and spread to economic growth.

The New York Times reported on the 15th regarding the 5.3% GDP growth in the fourth quarter, stating, "Because GDP only measures domestically produced goods, imports are subtracted from the index to avoid double-counting. After the tariffs were implemented, imports fell sharply, the trade deficit narrowed, and GDP rose." “The AI boom has effectively offset the burden of tariffs,” Gita Gopinath, a Harvard economist and former vice-chairman of the International Monetary Fund, told the New York Times on the 15th. “Consumption growth is being supported by rising wealth in the stock market, so the question for 2026 is whether that story will continue.”

Mark Zandi, chief economist at Moody’s Analytics, said, “American growth is all about AI,” adding, “Technology and healthcare are driving the train,” and “It has nothing to do with trade.”

The New York Times trade and economics reporter reported on the 15th that “U.S. growth has been strong in recent months, but it has been fueled primarily by the rapid growth of artificial intelligence, the construction of massive data centers that have spurred investment, and the surge in AI stocks has made Americans wealthy by investing in the stock market, spurring spending on goods and services.”

He added that “the manufacturing sector, which was designed to be supported by tariffs, is suffering, and according to the Institute for Supply Management (ISM), manufacturing contracted for the 10th straight month in December, and spending on new factories has also declined under the Biden administration.” Reuters reported on the 6th that “U.S. manufacturing activity plunged to a 14-month low in December, with new orders further shrinking and raw material costs rising,” adding that “the sector continues to bear the brunt of President Trump’s import tariffs.”

Reuters reported on the 6th that a survey by the U.S. Institute for Supply Management (ISM) indicated that "a near-term recovery is unlikely." The survey found that "only electrical equipment, appliances and components, and computers and electronics reported growth, while the remaining 15 industries—chemicals, miscellaneous manufacturing, machinery, and transportation equipment—reported contractions."

The survey continued, "Some metalworking manufacturers reported 'continued declines in order levels,' calling December 'dismal,' and 'January and February of this year look bleak, with bookings down 25% compared to the first two months of 2025.'" Reuters reported, "Trump has said tariffs are bringing hundreds of billions of dollars in new revenue to the U.S. Treasury and improving U.S. economic security. But beyond sectors boosted by the artificial intelligence investment boom, Trump's broad import tariffs have weakened manufacturing," and that the tariffs have had the opposite effect of what he has argued is essential for bolstering a long-declining domestic factory base.

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The Institute for Supply Management (ISM) survey found that computer and electronics manufacturers "have been unable to fully pass through cost increases, which has worsened margins," while transportation equipment manufacturers said orders for 2026 were "20% to 30% below historical buying patterns," and that "the industry-wide sentiment is that the first half of 2026 will be another slump." The ISM survey found that some manufacturers of electrical equipment, appliances, and parts reported a "rather bleak overall outlook," while some miscellaneous goods manufacturers reported a 17% decline in sales in 2025 due to tariffs.

The ISM's forward-looking new orders subindex was 47.7 in December, little changed from 47.4 in November, marking the fourth consecutive month of declining demand.

This decline has been 10 of the past 11 months, and tariffs have suppressed demand due to rising prices for some goods.

The key indicator was the manufacturing inventories index, which fell 3.7 percentage points to 45.2 last month, while the production index fell to 51 from 51.4 in November.

The ISM results showed that factory raw material costs, which have contributed to inflation continuing to exceed the Federal Reserve's 2% target, remain high. However, the ISM's payments index came in at 58.5, higher than the expected 57.0. US manufacturing saw factory employment decline for 11 straight months amid weak demand, the longest hiring slump in nearly five years according to the ISM.

Reuters reported that "for every one ISM comment about hiring, there were three about layoffs," highlighting the "job insecurity" and "layoffs" as companies continue to focus on accelerating workforce reductions due to uncertain near-term demand.

The U.S. Supreme Court is expected to rule on the legality of the premise behind Trump's tariffs around early 2026.

The Yale Budget Institute estimates that Trump's protectionist policies have pushed the average tariff on imports from less than 3% in January last year to nearly 17%. "Over the past two months, several tariff deals have been concluded and many waivers approved, and we expect more in the new year, but it remains to be seen whether this will be enough to pull the U.S. factory sector out of its current slump," Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, told Reuters.

The ISM said its manufacturing PMI fell to 47.9 in December 2025, its lowest reading since October 2024 and down from 48.2 in November.

A PMI reading below 50 indicates a contraction in manufacturing, which accounts for 10.1% of the economy.

This marks the 10th consecutive month that the PMI has remained below the 50 threshold, and economists surveyed by Reuters forecast the PMI to remain largely unchanged at 48.4 this year. The PMI forecast remained above 42.3, the lowest level, and the ISM assessed this level as "consistent with long-term overall economic expansion," suggesting a negative outlook for a "short-term recovery."

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The December decline reflected declines in the production and inventory sub-indexes, which had improved in November.

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"These declines this month continue the short-term 'bubble' seen in recent months of PMI data and are emblematic of recent manufacturing economic uncertainty," said Susan Spence, chair of the ISM Manufacturing Business Survey Committee. "Last month, manufacturing accounted for 85% of GDP, a sharp increase from 58% in November, and a significant decline from 39% in November to 43%," she told Reuters.

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Stock markets immediately plummeted after President Trump announced the largest tariffs in April, then reached record highs, and South Korea's stock market also surged. The U.S. trade deficit has narrowed sharply in recent months due to falling imports, reaching its lowest level since 2009 in October.

The decline in U.S. imports boosted third-quarter U.S. GDP and raised fourth-quarter GDP forecasts, making the economy appear to be in a growth mode. President Trump highlighted the strong economic growth figures and the narrowing trade deficit in his Tuesday speech.

However, some of the recent improvement in economic output and the trade deficit may be due to volatility stemming from dramatic policy changes.

U.S. companies surged in inventory ahead of anticipated tariffs, fueling a surge in imports early last year. This pushed first-quarter economic output into negative territory. This is because GDP measures only domestically produced goods, which means imports are subtracted from the index to avoid double-counting. After the tariffs took effect, imports fell sharply, the trade deficit narrowed, and GDP rose.

The Atlanta Federal Reserve (FRB) announced on the 15th that its GDPNow model projected real GDP growth (seasonally adjusted annualized rate) for the fourth quarter of 2025 at 5.3% as of January 14, up from 5.1% on January 9.

The Atlanta Fed cited recent data from the U.S. Census Bureau, Bureau of Labor Statistics, Treasury Department's Bureau of the Treasury, and National Association of Realtors, indicating that real personal consumption expenditures, real private domestic investment, and real government spending in the fourth quarter rose from 3.0%, 4.8%, and 1.3%, respectively.

The data also showed that real personal consumption expenditures, real private domestic investment, and real government spending in the fourth quarter increased from 3.1%, 5.1%, and 1.6%, respectively.

The New York Times reported that “the decline in imports boosted U.S. gross domestic product (GDP) in the third quarter and raised the GDP forecast for the fourth quarter,” adding that “imports fell sharply, the trade deficit narrowed, and GDP rose after the tariffs took effect.”

Brad Setzer, an economist at the Council on Foreign Relations, told the Times that more data is needed to distinguish the impact of the previous import surge from a more permanent adjustment in trade. “So far, the recent trend appears to reflect ‘crazy noise’ in trade trends rather than positive changes in the economy.”

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The Trump administration's hard-line conservative policies accelerated the US economy with low interest rates. The stock market remained strong thanks to individual tax cuts and increased supply, allowing companies to write off investment debt. Tariffs, even if they didn't actually benefit manufacturers, were used as powerful foreign policy tools.

Korea, riding the wave of this stock-boosting economic system, emerged as a shining model, achieving high growth through a "stock wealth monopoly."

Supply-side Reaganomics consistently promoted Korea as a model of "shining high growth" through the UN during the Cold War in the 1980s. Korea, with its productivity advantage stemming from low wages and low prices and high growth in heavy industry, was a pioneer in the military buildup that undermined the socialist economic system.

 

See <K Economy: Scraping the Bottom and Pushing the Top Up: Stock-Driven High-Income Wealth Growth, December 2, 2025>