“There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
“Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“A full-throated defense of economic dynamism.” - The Wall Street Journal
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
AI Summary.Federal Reserve Bank of New York researchers estimate that about 26% of a uniform tariff passes through into non-oil consumer goods prices over twelve months, with roughly 64% of that effect coming directly from higher import prices and the rest through domestic producers' input costs and markups. Pass-through into import prices is nearly immediate, while domestic price responses build gradually.
Mary Amiti,Sebastian Heise and David WeinsteinFederal Reserve Bank of New York
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FRBNY estimates that a uniform 10% tariff raised consumer-goods prices 2.6% after 12 months: 1.7pp directly via imported final goods, and 0.9pp mainly via higher imported-input costs for domestically produced goods, with the latter effect building over 9–12 months.
How much of a tariff reaches consumer prices within a year?
Core argument: Amiti, Heise, and Weinstein estimate that a uniform tariff passes through to non-oil consumer goods prices at roughly 26 percent over twelve months, with a 10 percent tariff raising prices 2.6 percentage points, 1.7 points of it via the direct import channel.
Tariff pass-through into U.S. import prices is nearly complete. Instrumenting realized duty rates with statutory tariffs to account for endogenous sourcing and exemptions, tariff pass-through into consumer-goods import prices is about 90.5%; a 10% increase in the duty rate raises import prices about 9.1%. At twelve months, a uniform 10% tariff raises consumer-goods prices 2.639%: 1.694pp through the direct channel, 0.770pp through marginal costs, and 0.175pp through strategic complementarity. Import-price pass-through is essentially immediate, while domestic prices adjust gradually; the contribution of the two indirect channels roughly doubles between six and twelve months, with much of the overall adjustment occurring within nine to twelve months. For the actual 2025–26 tariffs, the direct channel accounts for about 70% of the estimated effect; the marginal-cost channel accounts for about 22%, with strategic complementarity accounting for the remainder. Because the regressions include date fixed effects, the tariff contribution is identified relative to less-exposed goods and should be read as illustrative rather than as the absolute contribution to aggregate goods CPI.
Takeaways by Macro Roundup® AI
Amiti, Heise, and Weinstein estimate that a uniform tariff passes through to non-oil consumer goods prices at roughly 26 percent over twelve months, with a 10 percent tariff raising prices 2.6 percentage points, 1.7 points of it via the direct import channel.
The two indirect channels — marginal costs from imported inputs (0.77 percentage points) and strategic complementarity in domestic markups (0.17 points) — account for 36 percent of the total effect and roughly double between six and twelve months after tariff implementation.
Applied to the actual 2025–26 tariff schedule, the authors estimate the cumulative tariff contribution to goods CPI reached about 2.9 percentage points by February 2026, with import-price pass-through near 90 percent and retail pass-through of 0.56.
Related Articles:
The State of U.S. Tariffs July 24, 2026— The average statutory US tariff rate stands at 11.1% and, under current law including scheduled increases, is projected to reach 11.8% by year-end. The authors estimate current-law tariffs will raise consumer prices by about 0.7% and generate roughly $1.9tn over ten years, with revenue somewhat lower after accounting for tariffs' negative effect on economic output.
Who Is Paying for the 2025 U.S. Tariffs?— The authors estimate that 94% of U.S. tariff costs were borne domestically over the first eight months of 2025, with a 10% tariff associated with only a 0.6 percentage point decline in foreign export prices. Pass-through into U.S. import prices later declined to 86%, shifting more of the burden to foreign exporters.
Demand-Driven Inflation— Demand and supply curves estimated from pre-pandemic data imply relatively flat demand curves in the US and euro area, so adverse supply shifts would produce large output losses but comparatively little inflation. The authors argue explaining the observed combination of high inflation and output requires outward demand shifts, including accommodative monetary policy alongside fiscal expansion.
AI Summary.Japan, China, South Korea and Taiwan together hold just under $30tn in gross foreign assets, a five-fold rise over two decades, and about $10tn in net foreign assets. The author argues a current account surplus dominated by investment income, which tends to be reinvested abroad, generates less currency appreciation pressure than one driven by trade.
Udith SikandGavekal
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Northeast Asia’s ~$10T in net foreign assets would yield $400B annually at 4%, versus its ~$600B mean current-account surplus. Unlike export earnings, much investment income is reinvested abroad, creating less appreciation pressure.
Does investment income create less currency appreciation pressure than trade surpluses?
Core argument: Japan, China, South Korea and Taiwan together hold just under $30tn in gross foreign assets, a five-fold increase over the past two decades, with net foreign assets of about $10tn after liabilities to foreigners.
Japan, China, South Korea and Taiwan now hold nearly US10T net. At a 4% return, those net assets would generate roughly $600B over the past decade. The composition matters for exchange rates: exporters typically convert more of their foreign earnings into local currency to meet domestic costs, while foreign investment income is more likely to be reinvested abroad. A current-account surplus increasingly driven by investment income therefore creates less appreciation pressure than an equivalent trade surplus.
Takeaways by Macro Roundup® AI
Japan, China, South Korea and Taiwan together hold just under $30tn in gross foreign assets, a five-fold increase over the past two decades, with net foreign assets of about $10tn after liabilities to foreigners.
At the current 4% federal funds rate, $10tn of net foreign assets would imply roughly $400bn a year in net investment income for the four Northeast Asian economies, against a combined current account surplus averaging about $600bn over the last decade.
A current account surplus dominated by investment income generates less appreciation pressure than one dominated by trade, as exporters are more likely to repatriate and convert dollar earnings to cover domestic input costs while investment-income earners are more likely to reinvest abroad.
Related Articles:
Understanding Global Imbalances— The US, China, Germany, and Japan account for roughly two-thirds of global current account imbalances, with the US deficit at 4% of GDP financed by capital inflows into dollar assets. The average duration of a surplus or deficit spell roughly doubled since the 1980s, building large net foreign asset and liability positions.
Who Will Win The War Of Neo-Mercantilists?— China's manufacturing export surplus is around 2% of world GDP, roughly twice the largest surplus Japan ever ran, while domestic demand has stalled. Unexplained negative net income of about $125bn on its $4tn in net foreign assets, versus an expected $100bn surplus, supports the argument that the renminbi is about 30% undervalued.
The Real Problem With Global Trade— Asia's $1.5tn trade surplus is larger as a share of world output than at any point since 1945 and is the only large surplus in the global economy. Exchange rates have a meaningful impact on trade balances: China's surplus reached about 10% of its output amid renminbi depreciation, then fell below 2% after a 40% real appreciation.
AI Summary.The U.S.-bound shipping network once turned about 89% of potential fleet capacity into effective service, but utilization fell below 70% as ships waited at anchor, slowed steaming, or sailed around maritime bottlenecks, and has not recovered. Diverting vessels around the Cape of Good Hope drives much of the loss.
Xiwen Bai, Jesús Fernández-Villaverde, Yiliang Li, Ricardo Marto and Francesco ZanettiNational Bureau Of Economic Research
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US-bound shipping can fall far short of potential after disruptions. Pandemic queuing and slow steaming drove effective capacity from ~89% of potential to <70%. Later, Houthi attacks left it near 79% as ships rerouted around the Cape of Good Hope.
Why has shipping capacity to America not regained its prior utilization?
Core argument: The U.S.-bound shipping network converted about 89% of potential fleet capacity into effective service in 2016–2019, but aggregate utilization fell below 70% in 2021–2022 as ships waited at anchor, steamed slowly, or sailed around maritime bottlenecks.
In 2016–2019, the U.S.-bound shipping network turned about 89% of the fleet’s potential capacity into effective service [Figure 3.5]. During 2021–2022, effective capacity declined despite potential capacity reaching record highs. Pandemic-era port congestion and slower steaming pushed aggregate utilization below 70%. On the Asia-Pacific–U.S. West Coast route, utilization fell from about 92% before 2020 to 53% by late 2021. The route has since recovered but remains below its old peak. The network as a whole has not regained its pre-pandemic utilization. More recently, rerouting after the 2023–2024 Houthi attacks in the Red Sea held aggregate utilization near 79%. Utilization on the Middle East and Asia-Pacific routes to the U.S. East Coast via Suez fell to 48% and 61%, respectively, largely because diversion around the Cape of Good Hope lengthened voyages without increasing cargo delivered.
Takeaways by Macro Roundup® AI
The U.S.-bound shipping network converted about 89% of potential fleet capacity into effective service in 2016–2019, but aggregate utilization fell below 70% in 2021–2022 as ships waited at anchor, steamed slowly, or sailed around maritime bottlenecks.
Utilization on the Asia-Pacific–U.S. West Coast route dropped from 92% before 2020 to 53% by late 2021 amid port congestion and slower steaming, recovering since but remaining well below its old peak.
Since late 2023, utilization on the Middle East and Asia-Pacific routes to the U.S. East Coast via the Suez Canal has fallen to 48% and 61%, with diversions around the Cape of Good Hope driving much of the loss as ships travel longer distances without delivering additional cargo.
Related Articles:
How to Fight an Economic War— China earned about $3.4bn from exporting rare-earth elements and magnets in a year, while the U.S. Geological Survey estimates a 30% disruption to U.S. supply of the rare-earth element neodymium alone would cut U.S. GDP by 2.2%, over $600bn. This asymmetry gives Chinese export controls their leverage.
Industrial Policy and Economic Security— Industrial policy justified on national security grounds requires weighing how much economic inefficiency is worth tolerating, since costs incurred today make a country poorer and therefore less able to project power later. The calculation is difficult because security gains are probabilistic and long-term economic costs are speculative.
The Rise Of The Security Premium— Energy security concerns, not environmentalism, are argued to drive the buildout of solar, wind, and nuclear power, since domestic generation avoids chokepoints like Hormuz, the Red Sea, and the Panama Canal. China and India are expected to demand higher strategic stockpiles of energy and other critical commodities, repricing security above efficiency.
AI Summary.China faces three options as external demand weakens: shift a larger share of national income to households so consumption absorbs more output, keep relying on investment despite weak returns, or let production and growth slow. The first requires substantial changes in income distribution and saving incentives; the second risks more debt and excess capacity; the third implies higher unemployment.
Michael PettisChina Financial Markets
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“Beijing cannot choose whether China will adjust; one way or another, it will.” Pettis warns Zhongnanhai against postponing rebalancing with another round of debt-financed investment “despite increasingly weak returns.”
What choices does China face as external demand weakens?
Core argument: China faces three options: shift a larger share of national income to households so consumption absorbs more output, keep relying on investment despite weak returns, or allow production and growth to slow.
What it can choose is how painful that adjustment will be. If weaker external demand is met by encouraging more borrowing and domestic investment, regardless of whether that investment is economically justified, China risks postponing the inevitable. China therefore faces the same basic choice Japan confronted, but with deeper imbalances and less accommodating global conditions. It can shift a larger share of national income toward households and allow consumption to absorb more of what the economy produces; or it can continue relying on investment, despite increasingly weak returns; or it can allow production and growth to slow. The first choice requires a substantial change in the domestic distribution of income and the incentives to save. The second risks still more debt and excess capacity and, ultimately, a more painful adjustment. The third implies higher unemployment and weaker growth.
Takeaways by Macro Roundup® AI
China faces three options: shift a larger share of national income to households so consumption absorbs more output, keep relying on investment despite weak returns, or allow production and growth to slow.
China confronts the same basic choice Japan faced, but with deeper imbalances and less accommodating global conditions, and can choose only how painful the adjustment will be.
Meeting weaker external demand with more borrowing and domestic investment, regardless of whether it is economically justified, risks further debt and excess capacity and a more painful adjustment, while slower growth implies higher unemployment.
Related Articles:
The Year of the Trojan Fire Horse: China’s Imbalanced Economy and Unrelenting Mercantilism— About 30% of Chinese industrial companies are unprofitable "zombies" kept alive by subsidies far larger than those elsewhere, rather than exiting amid falling industrial producer prices. Countries with large increases in manufactured imports from China also saw slowdowns in domestic manufacturing, including declining manufacturing shares of output across most of Southeast Asia.
Sticking with What Works: Raising GDP Forecast on China’s Manufacturing Push— Stronger Chinese growth driven by export-oriented manufacturing may not produce net positive spillovers: for every 1pp export-driven boost to China's GDP, other economies may see a 0.1–0.3pp drag, with high-tech producers such as Europe and Japan facing greater pressure. Cheaper Chinese goods continue to exert a disinflationary impulse.
Record Influx Of University Graduates Pushes China’s Youth Unemployment Rate To 18.9%— China's urban unemployment rate for 16- to 24-year-olds excluding students reached 18.9%, the highest since the statistics agency revised its methodology to exclude students. A record influx of university graduates is entering a job market weighed down by weak domestic demand and growing adoption of artificial intelligence.
AI Summary.East Asian economies accumulated large US dollar and euro reserves by building export machines based on undervalued currencies, a strategy one analyst argues has run its course. He contends China should revalue aggressively and return to market-determined prices, since the resulting accounting losses reflect real losses already incurred.
Charles GaveGavekal
Date Posted:
Charles Gave argues that East Asia’s post-1997 model of undervalued currencies, which has generated >5T in FX reserves, has run its course. His prescription is aggressive China-led revaluation to shift purchasing power toward Asian consumers.
Should China revalue its currency aggressively and let markets set prices?
Core argument: Gave argues that East Asia’s strategy of building export machines on undervalued currencies to accumulate large US dollar and euro reserves has run its course.
To accumulate their huge reserves of US dollars and euros, [East Asia] built formidable export machines based on undervalued currencies. [Gave sees] only one solution: to return to market-determined prices as quickly as possible. As the leading economy in the region, China should bite the bullet and say the time has come to revalue aggressively. Yes, Asia will take accounting losses. But that does not greatly matter; the actual losses have already been taken a long time ago.
Takeaways by Macro Roundup® AI
Gave argues that East Asia’s strategy of building export machines on undervalued currencies to accumulate large US dollar and euro reserves has run its course.
Gave sees a return to market-determined prices as quickly as possible as the only solution, with China, as the region’s leading economy, revaluing aggressively.
Gave contends that the accounting losses Asia would take on revaluation do not greatly matter because the actual losses were taken long ago.
Related Articles:
The World Should Not Ignore China’s Undervalued Currency— China's reported current account surplus of about 4% of GDP is roughly 3 percentage points above the International Monetary Fund's estimated norm, implying a currency undervaluation of about 20%. Adjusting for surging gold imports and a misreported investment income deficit would lift the surplus to about 6% of GDP and the estimated undervaluation to 30–35%.
Who Will Win The War Of Neo-Mercantilists?— China's manufacturing export surplus is around 2% of world GDP, roughly twice the largest surplus Japan ever ran, while domestic demand has stalled. Unexplained negative net income of about $125bn on its $4tn in net foreign assets, versus an expected $100bn surplus, supports the argument that the renminbi is about 30% undervalued.
The Year of the Trojan Fire Horse: China’s Imbalanced Economy and Unrelenting Mercantilism— About 30% of Chinese industrial companies are unprofitable "zombies" kept alive by subsidies far larger than those elsewhere, rather than exiting amid falling industrial producer prices. Countries with large increases in manufactured imports from China also saw slowdowns in domestic manufacturing, including declining manufacturing shares of output across most of Southeast Asia.
AI Summary.Direct carbon pricing—carbon taxes and emissions trading systems—now covers about 30% of global emissions, with most coverage coming from emissions trading systems in China and the European Union. The EU complements its system with a Carbon Border Adjustment Mechanism that prices carbon on certain high-emitting imports regardless of where they are produced.
Karen Karniol-Tambour, Jeremy Ng and Daniel HochmanBridgewater Associates
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Bridgewater argues that carbon pricing is increasingly becoming an industrial-policy tool, with measures such as the EU’s CBAM supporting domestic producers by limiting carbon leakage, while carbon prices encourage investment in energy efficiency and industrial upgrading.
How much of global emissions does carbon pricing now cover?
Core argument: Direct carbon pricing, spanning carbon taxes and emissions trading systems, now covers roughly 30% of global emissions, with most of that coverage coming from emissions trading systems in China and the EU.
Carbon pricing schemes have continued to grow over the last few years. Some form of direct carbon pricing now covers ~30% of global emissions—spanning both carbon taxes and emissions trading systems. Most coverage comes from emissions trading systems in China and the EU, and these schemes are increasingly being adapted to fit their specific industrial policy goals. For example, as a complement to its domestic emissions trading system, the EU has started to implement a Carbon Border Adjustment Mechanism (CBAM), which imposes carbon pricing on certain high-emitting imports regardless of where they are produced. In a world of modern mercantilism, policy makers have increasingly emphasized the need for carbon pricing schemes to support—rather than constrain—industrial competitiveness.
Takeaways by Macro Roundup® AI
Direct carbon pricing, spanning carbon taxes and emissions trading systems, now covers roughly 30% of global emissions, with most of that coverage coming from emissions trading systems in China and the EU.
The EU has begun implementing a Carbon Border Adjustment Mechanism, which imposes carbon pricing on certain high-emitting imports regardless of where they are produced, as a complement to its domestic emissions trading system.
Carbon pricing schemes are increasingly being adapted to fit specific industrial policy goals, with policy makers emphasizing that such schemes should support rather than constrain industrial competitiveness.
Related Articles:
We Are All Mercantilists Now— The postwar free-trade system depended on American soft power and broad respect for its rules, and as countries defected to mercantilist policies each defection pushed others to respond in kind. China's economic size and its use of currency management, public procurement, state subsidies and protectionism to build leading industries in electric vehicles, solar power and batteries broke the existing order.
Power Politics: Energy Self-Sufficiency in a Modern Mercantilist World— China leads in adding power to the grid, with more than 30,000 miles of ultra-high-voltage transmission lines versus zero in the US and lead times for large transformers of 48 weeks against a US average of 143 weeks. This positions China to accommodate new demand sources such as artificial intelligence.
Fighting Words: The Energy Transition in 2026— Estimates based on primary energy overstate how much electricity is needed to replace oil in passenger cars, since electric motors convert 80%-90% of electricity into motion versus about 18% for gasoline cars. Measuring useful final energy net of waste heat avoids this "primary energy fallacy": the US consumed 45 exajoules of useful final energy versus 95 exajoules of primary energy.
AI Summary.A projection estimates China gains about $1.13tn in annual export value by 2030 relative to baseline while the rest of the world loses about $5.1tn, including $2.25tn for the G7. The authors attribute the net global decline to trade shifting toward Chinese goods whose export prices keep falling.
Charles Austin Jordan and Logan WrightRhodium Group
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Is Database:
Database
China’s share of global exports by volume is on track to rise from 20% in 2025 to 28% by 2030. Yet China’s rising export share may depress the total value of global exports as lower-priced Chinese goods displace more expensive exports from other countries.
Do China's export share gains reduce global export values?
Core argument: The projection has China gaining roughly $1.13 trillion in annual export value by 2030 relative to the baseline scenario, while the rest of the world loses about $5.1 trillion.
The net result of our projection would suggest that China gains around $1.13 trillion in annual export value by 2030 relative to the baseline scenario, while the rest of the world loses around $5.1 trillion, with the G7 accounting for $2.25 trillion of those potential losses alone. This implies that China’s export share gains effectively destroy overall global trade values relative to the status quo due to continued declines in export prices. Regardless of which assumptions are used, China’s export share gains appear to reduce global total potential export values, because trade patterns are shifting toward Chinese goods that are declining in price.
Takeaways by Macro Roundup® AI
The projection has China gaining roughly $1.13 trillion in annual export value by 2030 relative to the baseline scenario, while the rest of the world loses about $5.1 trillion.
The G7 accounts for $2.25 trillion of the projected $5.1 trillion in export value losses borne by countries outside China.
China’s export share gains appear to reduce global total potential export values regardless of the assumptions used, because trade patterns shift toward Chinese goods whose prices continue to decline.
Related Articles:
The Year of the Trojan Fire Horse: China’s Imbalanced Economy and Unrelenting Mercantilism— About 30% of Chinese industrial companies are unprofitable "zombies" kept alive by subsidies far larger than those elsewhere, rather than exiting amid falling industrial producer prices. Countries with large increases in manufactured imports from China also saw slowdowns in domestic manufacturing, including declining manufacturing shares of output across most of Southeast Asia.
China Is Making Trade Impossible— Interviews with Chinese economists, technologists and business leaders yielded no clear answer to what products China would want to buy from the rest of the world in future, beyond commodities, luxury goods and higher education. The author argues China sees nothing it cannot eventually make better and cheaper itself, undermining trade as a two-way exchange.
Sticking with What Works: Raising GDP Forecast on China’s Manufacturing Push— Stronger Chinese growth driven by export-oriented manufacturing may not produce net positive spillovers: for every 1pp export-driven boost to China's GDP, other economies may see a 0.1–0.3pp drag, with high-tech producers such as Europe and Japan facing greater pressure. Cheaper Chinese goods continue to exert a disinflationary impulse.
AI Summary.By manufacturing value added China has the world's largest manufacturing sector, with the US and European Union roughly co-equal and individually smaller; netting out intra-EU trade, the EU is the largest exporter of goods and services and the US a distant third. The author argues all three are vulnerable to weaponized interdependence, with China apparently least so.
Paul KrugmanKrugman Wonks Out
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Product-level data suggest China is less dependent on the EU and the US than they are China, even though US and EU manufacturing output jointly exceeds that of China. Krugman argues that in this tripartite world, economic power may be increasingly downstream from a bloc’s economic resilience.
How do manufacturing and trade size shape vulnerability to weaponized interdependence?
Core argument: China has by far the world’s largest manufacturing sector by value added, while the US and EU are roughly co-equal, each individually smaller than China but larger than China combined.
If we look at manufacturing value added, China has by far the biggest manufacturing sector; the US and EU are roughly co-equal, both individually smaller than China but bigger combined. Netting out intra-EU exports, the EU is the world’s largest exporter of goods and services, with the US a distant third [see figures in gallery]. [The featured image, from the Mercator Institute for China Studies, shows that from 2000–2022 the number of product categories in which the US and EU depended on China rose, while the number in which China depended on them fell. The chart excludes textiles]. The Western economies are increasingly dependent on China, and if anything the US is more dependent than the EU [by this product-count measure]. Who is vulnerable here? The three superpowers are all vulnerable to weaponized interdependence, although apparently China less than the rest. What really scares me is Taiwan. Given time, we can reconstruct a semiconductor supply chain without Taiwan. But the few years it would take would be very ugly.
Takeaways by Macro Roundup® AI
China has by far the world’s largest manufacturing sector by value added, while the US and EU are roughly co-equal, each individually smaller than China but larger than China combined.
Netting out intra-EU exports, the EU is the world’s largest exporter of goods and services, with the US a distant third.
Mercator Institute for China Studies figures show that from 2000 to 2022 the number of product categories in which the US and EU depended on China rose while the number in which China depended on them fell, excluding textiles.
Related Articles:
The Real China Trump Card— Among the world's 2,000 largest companies, U.S. firms generated 38% of global profits and firms based in allied countries 35%, while Chinese firms including Hong Kong generated 16%. The U.S. leads in 20 of 27 industries and China in three, with profits used as a measure of economic chokepoints.
How Should We Measure Economic Power?— The authors argue profits measure economic power because they show a firm can do what others can't, and by that metric U.S. firms dominate globally—with Japan and Europe significant and China second-tier—implying greater U.S. power than GDP or industrial output comparisons suggest. The gap favoring the U.S. is most pronounced in high-tech products.
How to Fight an Economic War— China earned about $3.4bn from exporting rare-earth elements and magnets in a year, while the U.S. Geological Survey estimates a 30% disruption to U.S. supply of the rare-earth element neodymium alone would cut U.S. GDP by 2.2%, over $600bn. This asymmetry gives Chinese export controls their leverage.
