Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
  • “…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
  • “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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, April 4, 2025

AI Summary. China announced 34% tariffs on all US imports in retaliation for new US duties on Chinese goods, which bring total US levies above the 60% Trump threatened during his campaign. China also banned exports of seven types of rare earths and added US drone makers to an "unreliable entity" list barring Chinese suppliers from selling them components.

Eleanor Olcott, Edward White, and Aime Williams Financial Times
Date Posted:

China announced a 34% tariff on all imports of American goods, which in 2024 totaled $143B. China also announced export bans on seven types of rare earths and a ban on selling parts to drone manufacturers, in retaliation.

Is China retaliating against US tariffs with duties and export bans?

Core argument: China announced 34% tariffs on all US imports in retaliation for President Donald Trump's duties, moving the world closer to a full-blown trade war.

China has announced tariffs of 34% on all US imports in retaliation for duties unveiled by President Donald Trump this week, moving the world closer to a full-blown trade war. Trump’s announcement this week of the 34% tariff on Chinese imports to the US will take Washington’s total levies on Chinese goods to more than the 60% he threatened during last year’s election campaign. China announced export bans on seven types of rare earths on Friday, while US tech companies, including drone makers Skydio and Brinc Drones, were added to its “unreliable entity” list, which bans Chinese suppliers from selling components to them.

Takeaways by Macro Roundup® AI

  1. China announced 34% tariffs on all US imports in retaliation for President Donald Trump's duties, moving the world closer to a full-blown trade war.
  2. Trump's 34% tariff on Chinese imports takes Washington's total levies on Chinese goods above the 60% he threatened during last year's election campaign.
  3. China imposed export bans on seven types of rare earths and added US drone makers Skydio and Brinc Drones to its "unreliable entity" list, barring Chinese suppliers from selling them components.

Related Articles:

  • Where We Stand: The Fiscal, Economic, and Distributional Effects of All U.S. Tariffs Enacted in 2025 Through April 2 — The authors estimate that all US tariffs enacted in 2025 bring the average effective tariff rate to 22.5%, the highest since 1909, raising the short-run price level by 2.3% — an average consumer loss of $3,800 per household, or $1,700 for the lowest-income households. They project US real GDP growth 0.9 percentage points lower and $3.1tn in revenue.
  • Liberation Day — US "reciprocal" tariff rates were set at roughly half of each country's bilateral trade balance as a share of its imports, with a 10% floor, so they bear little relation to standard measures of trade distortions. Because rates track bilateral deficits, the author argues negotiations are unlikely to deliver quick tariff reductions.
  • Pettis On New Round Of American Tariffs — Bilateral tariffs mostly divert trade rather than shrink the overall US trade deficit, because they address neither the internal imbalances driving surplus countries' surpluses nor the US role in accommodating them. After an earlier round of US tariffs, the US deficit with China fell while both the overall US deficit and China's overall surplus rose.

AI Summary. The article argues that basing tariffs on bilateral trade deficits is mistaken, since bilateral balances reflect product mix, geography, and corporate tax optimization rather than a country's net contribution to global demand or supply, which only its overall balance of payments reveals. U.S. export data record where goods first land, not their final destination.

Matt Klein The Overshoot
Date Posted:

Focus on bilateral balances is misguided. @M_C_Klein argues a country’s trade should be measured by the aggregate balance of payments with all countries, as bilateral relationships are “affected by product mix, geography, and corporate tax optimization.”

Should tariffs be based on bilateral trade deficits?

Core argument: The April 2 tariff schedule assumes the aggregate U.S. trade deficit equals the sum of bilateral deficits, an assumption that fails because trade crosses borders for many reasons, including product mix, geography, and corporate tax optimization.

The tariff schedule published on April 2 is predicated on the assumption that the aggregate U.S. trade deficit should be understood as the sum of U.S. bilateral trade deficits with individual countries. This assumption makes no sense, because trade occurs across borders for all sorts of different reasons. The only way to determine whether a country is contributing more on net to global demand or supply is by looking at its aggregate balance of payments with all countries, not individual bilateral relationships that are more often affected by product mix, geography, and corporate tax optimization. One big clue that bilateral balances are meaningless is that the U.S. runs large trade surpluses with the Netherlands, the UAE, Hong Kong, and Singapore, even though all of those countries have massive trade surpluses with the world as a whole. The reason is simply that there are major ports in all of those places, and the U.S. data only show where exports land before they are shipped elsewhere. Cambodians and Vietnamese were hit with some of the highest “reciprocal” tariff rates even though they almost certainly import some goods from the U.S. via Singapore, as do Indonesians, Malaysians, and Thais. Yet those are wrongly counted as “Singaporean” imports.

Takeaways by Macro Roundup® AI

  1. The April 2 tariff schedule assumes the aggregate U.S. trade deficit equals the sum of bilateral deficits, an assumption that fails because trade crosses borders for many reasons, including product mix, geography, and corporate tax optimization.
  2. The U.S. runs large trade surpluses with the Netherlands, the UAE, Hong Kong, and Singapore even though each runs massive surpluses with the world, because U.S. data record only where exports land at major ports before onward shipment.
  3. Cambodia and Vietnam received some of the highest "reciprocal" tariff rates though they almost certainly import some U.S. goods via Singapore, as do Indonesia, Malaysia, and Thailand, with those shipments counted as Singaporean imports.

Related Articles:

  • Liberation Day — US "reciprocal" tariff rates were set at roughly half of each country's bilateral trade balance as a share of its imports, with a 10% floor, so they bear little relation to standard measures of trade distortions. Because rates track bilateral deficits, the author argues negotiations are unlikely to deliver quick tariff reductions.
  • Pettis On New Round Of American Tariffs — Bilateral tariffs mostly divert trade rather than shrink the overall US trade deficit, because they address neither the internal imbalances driving surplus countries' surpluses nor the US role in accommodating them. After an earlier round of US tariffs, the US deficit with China fell while both the overall US deficit and China's overall surplus rose.
  • Trade Intervention for Freer Trade — The authors argue the United States should counter surplus countries' trade policies either by restricting their goods exports through tariffs or by restricting their capital inflows through taxes, volume limits, reserve requirements, transaction approvals, or investor eligibility rules. They contend capital controls are a more targeted alternative to uniform tariffs, which impose equal costs on more and less mercantilist countries.

AI Summary. The US goods trade deficit, 4.2% of GDP in 2024, reflects Americans spending more than they produce and will persist until spending falls relative to income, such as through a narrower federal budget deficit. Targeting bilateral deficits can only shift them between countries while curtailing gains from trade.

Maurice Obstfeld Peterson Institute for International Economics
Date Posted:
Is Database:
Database

Obstfeld argues without reducing America’s spending relative to its income via fiscal consolidation, efforts “to eliminate all bilateral deficits [are] doomed to failure” and will result in a game of “whack-a-mole” and a sharp loss of efficiency gains.

Can targeting bilateral trade deficits shrink the overall trade deficit?

Core argument: The US goods trade deficit was 4.2% of GDP in 2024, which the author attributes to Americans spending more than they produce and importing the difference from abroad.

Behind Trump's tariff initiative is his stated desire to reduce the overall US trade deficit in goods, which was 4.2% of GDP in 2024. [The United States has a service export surplus equal to 1.1% of GDP. However, this figure likely understates the true surplus in services owing to the profit-shifting strategies of some multinationals.] This [goods] deficit reflects that Americans spend more than they produce, obliging them to import the difference from abroad. Until the United States reduces its spending relative to its income—for, example, by narrowing the federal budget deficit—the US overall trade deficit will not go away. Since the overall trade deficit is the sum of US surpluses and deficits with all trade partners, the administration's attempt to eliminate all bilateral deficits is doomed to failure. At best, it will be able to shuffle them around, in a game of whack-a-mole where a smaller deficit with one country is matched by higher bilateral deficits with others. In the process, however, the efficiency gains from international trade are sharply curtailed.

Takeaways by Macro Roundup® AI

  1. The US goods trade deficit was 4.2% of GDP in 2024, which the author attributes to Americans spending more than they produce and importing the difference from abroad.
  2. The US services export surplus equals 1.1% of GDP, a figure the author argues understates the true services surplus because of profit-shifting strategies by some multinationals.
  3. The author argues the administration's attempt to eliminate all bilateral deficits is doomed to fail, at best shuffling deficits among trade partners while sharply curtailing the efficiency gains from international trade.

Related Articles:

  • Without Spending Cuts, Brace for Slow Growth — The author argues that US trade deficits have funded debt-financed consumption rather than domestic business investment, noting that since 2000 real interest rates have tended to fall as trade deficits widen while business investment has been uncorrelated with both. If tariffs shrink trade deficits, interest rates could rise and worsen America's fiscal balance.
  • The U.S. Trade Deficit: Myths and Realities — Taxing capital inflows would weaken the dollar but could raise domestic interest rates and depress investment, harming long-term growth, while an interest rate cut absent recession would be inflationary and erode any real depreciation needed to durably improve the trade balance. Fiscal restraint could weaken the dollar and reduce the trade deficit.
  • Pettis on Obstfeld — Pettis argues that saving rates in China, Japan, South Korea, Germany, Russia and Saudi Arabia are driven by their own domestic policies and conditions, and in turn drive the US saving rate. He notes the US has an open capital account, deep financial markets, and limited intervention in credit allocation.

AI Summary. Trade restrictions strengthen the dollar all else equal, so the dollar's depreciation after new tariffs is best explained by reduced investor confidence in the U.S. economic outlook. That same loss of confidence is reflected in U.S. stocks declining relative to foreign markets and risks an unwinding of overweight positions in U.S. assets.

Greg Mankiw Greg Mankiw’s Blog
Date Posted:

Greg Mankiw notes all things being equal, tariffs should strengthen the $; however the $ is depreciating in the wake of the new tariffs. “Other things are not equal. In particular, the policy has reduced investor confidence in the U.S. economy.”

Why is the dollar depreciating despite new trade restrictions?

Core argument: The author argues the dollar is depreciating after Trump's tariff announcement because the policy has reduced investor confidence in the U.S. economy, offsetting the dollar-strengthening effect that trade restrictions would otherwise have.

[Previously] I noted, other things being equal, trade restrictions strengthen the dollar. Why then is the dollar depreciating in the wake of the newly announced Trump tariffs? The answer, I believe, is that other things are not equal. In particular, the policy has reduced investor confidence in the U.S. economy. That's also why the U.S. stock market is declining relative to stock markets abroad. The WSJ explains the dollar depreciation as follows: "The dollar’s sharp fall after President Trump’s tariff announcement raises concerns about the risk of a broader confidence crisis, Deutsche Bank’s George Saravelos says in a note. “Developments since the start of the year make us worried about a broader undermining of confidence in the U.S. economic outlook and the medium-term desirability of dollar allocations.” This risks an unwinding of overweight positions in U.S. assets from countries that have exported capital to the U.S. over the past decade."

Takeaways by Macro Roundup® AI

  1. The author argues the dollar is depreciating after Trump's tariff announcement because the policy has reduced investor confidence in the U.S. economy, offsetting the dollar-strengthening effect that trade restrictions would otherwise have.
  2. The author attributes the U.S. stock market's decline relative to stock markets abroad to the same loss of investor confidence in the U.S. economy.
  3. Deutsche Bank's George Saravelos warns that the dollar's sharp fall raises concerns about a broader confidence crisis and risks an unwinding of overweight positions in U.S. assets by countries that have exported capital to the U.S. over the past decade.

Related Articles:

  • Risk Rising of a Foreign Pullback from the S&P 500 — Large inflows from abroad have left foreign investors significantly overweight US equities. Combined with the dollar's decline and what the author characterizes as overvaluation of the largest US technology stocks, this creates significant downside risk to the S&P 500 if foreign investors sell.
  • The Great European Disentanglement From US Stocks Has Only Just Started — Federal Reserve data show European investors held about $9tn in US stocks, roughly 17% of the total value of the US market. After inflation, a dollar invested in the US at the start of 2000 was worth $3.28 by the end of 2024, versus $1.63 for the rest of the world.
  • The U.S. Trade Deficit: Myths and Realities — Taxing capital inflows would weaken the dollar but could raise domestic interest rates and depress investment, harming long-term growth, while an interest rate cut absent recession would be inflationary and erode any real depreciation needed to durably improve the trade balance. Fiscal restraint could weaken the dollar and reduce the trade deficit.

AI Summary. US assets have boomed relative to the rest of the world since the global financial crisis, with European holdings of US stocks growing substantially as inflows lifted the dollar and raised returns for foreign investors, drawing in more funds. Foreign investors now have an incentive to take those considerable profits.

John Authers Bloomberg
Date Posted:
Is Database:
Database

The dollar’s weakness risks driving a flight from US equities, “US stocks, particularly Big Tech, have been a kind of piggy bank for the world. The risk now is that foreign investors will smash the piggy bank.” @johnauthers

Will foreign investors cash out their profits from US stocks?

Core argument: US assets have boomed relative to the rest of the world since the Global Financial Crisis, with European holdings of US stocks growing at a pace described as breathtaking.

The greatest issue concerns the dollar. Relative to the rest of the world, US assets have boomed ever since the Global Financial Crisis. The growth in European holdings of US stocks has been breathtaking. This has been helped by a virtuous circle. The flows push up the dollar, which increases the returns for foreign investors and fosters confidence that the US is unstoppable, thus drawing in more funds. It’s a classic example of what George Soros calls reflexivity, or the ability of the market to create its own reality. The profits European investors are still sitting on are considerable, and they’ll now have an incentive to take those profits, which could be needed for investing in a much more difficult trade war environment at home. US stocks, particularly Big Tech, have been a kind of piggy bank for the world. The risk now is that foreign investors will smash the piggy bank. If trade flows are going to fall, as is more or less inevitable if these tariffs are imposed for any period of time, the risk is that capital flows will have to follow.

Takeaways by Macro Roundup® AI

  1. US assets have boomed relative to the rest of the world since the Global Financial Crisis, with European holdings of US stocks growing at a pace described as breathtaking.
  2. A virtuous circle drove those flows, as inflows pushed up the dollar, raised returns for foreign investors and fostered confidence in the US, drawing in more funds — an example of what George Soros calls reflexivity.
  3. European investors sitting on considerable profits in US stocks, particularly Big Tech, have an incentive to take them for investing in a harder trade-war environment at home, and if tariffs cut trade flows, capital flows risk following.

Related Articles:

  • Why the Dollar is Depreciating Today — Trade restrictions strengthen the dollar all else equal, so the dollar's depreciation after new tariffs is best explained by reduced investor confidence in the U.S. economic outlook. That same loss of confidence is reflected in U.S. stocks declining relative to foreign markets and risks an unwinding of overweight positions in U.S. assets.
  • The Trade War Will Pound Stocks — Efforts to cut U.S. trade deficits and escalate tensions with allies risk deterring foreign capital, and foreigners need only stop buying U.S. assets to hit prices, as China and Russia already have. Bridgewater estimates nonfinancial U.S. firms capture 39% of global profits though the U.S. is 15% of world output.
  • The Great European Disentanglement From US Stocks Has Only Just Started — Federal Reserve data show European investors held about $9tn in US stocks, roughly 17% of the total value of the US market. After inflation, a dollar invested in the US at the start of 2000 was worth $3.28 by the end of 2024, versus $1.63 for the rest of the world.

AI Summary. Microsoft has halted talks for or delayed data center projects in Indonesia, the UK, Australia, Illinois, North Dakota and Wisconsin. It is unclear how much of the pullback reflects expectations of weaker demand for artificial intelligence and cloud services versus construction constraints such as shortages of power and building materials.

Brody Ford, Dawn Lim, Olivia Solon, and Faris Mokhtar Bloomberg
Date Posted:

Microsoft has paused construction on data centers across six countries. Bloomberg notes it’s unclear whether the pullback reflects demand concerns or “shortages of power and building materials.”

Is a pullback on data centers a sign of weaker AI demand?

Core argument: Microsoft has halted talks for or delayed data center development in Indonesia, the UK, Australia, Illinois, North Dakota and Wisconsin, according to people familiar with the situation.

Microsoft has pulled back on data center projects around the world, suggesting the company is taking a harder look at its plans to build the server farms powering artificial intelligence and the cloud. The software company has recently halted talks for, or delayed development of, sites in Indonesia, the UK, Australia, Illinois, North Dakota and Wisconsin, according to people familiar with the situation. It’s hard to know how much of the company’s data center pullback reflects expectations of diminished demand versus temporary construction challenges, such as shortages of power and building materials. Some investors have interpreted signs of retrenchment as an indication that projected purchases of AI services don’t justify Microsoft’s massive outlays on server farms.

Takeaways by Macro Roundup® AI

  1. Microsoft has halted talks for or delayed data center development in Indonesia, the UK, Australia, Illinois, North Dakota and Wisconsin, according to people familiar with the situation.
  2. It is unclear how much of Microsoft's data center pullback reflects expectations of diminished demand versus temporary construction challenges such as shortages of power and building materials.
  3. Some investors have interpreted signs of Microsoft's retrenchment as an indication that projected purchases of AI services do not justify the company's outlays on server farms.

Related Articles:

  • Microsoft Abandons Data Center Projects, TD Cowen Says — Microsoft has walked away from new US and European data center projects totaling about 2 gigawatts of electricity capacity, which TD Cowen analysts attribute to an oversupply of computing capacity relative to current AI demand forecasts. Google and Meta picked up some of the freed European capacity, the analysts wrote.
  • Gen AI: Too Much Spend, Too Little Benefit? — The author argues generative AI is unlikely to drive revenue expansion because it helps employees find information faster rather than find better information. If AI's benefits remain limited to efficiency gains, competitors can adopt the same tools, so cost savings get arbitraged away rather than raising prices or margins.
  • A Severe Case of COVIDIA: Prognosis For An AI-Driven US Equity Market — Computing cycles move from infrastructure to platforms to applications, and NVIDIA data center revenues as a share of market-wide capital spending are projected to reach levels last seen at the 1969 mainframe peak and the dot-com boom. Large cloud providers spend more than twice as much training foundational models as running them for customers.

AI Summary. The world is undergoing an energy addition rather than an energy transition: renewables have grown as a share of supply while fossil fuel production has also risen in absolute terms, leaving total energy supply and greenhouse gas emissions at all-time highs.

Karen Karniol-Tambour, Carsten Stendevad, Daniel Hochman and Jeremy Ng Bridgewater Associates
Date Posted:
Is Database:
Database

Bridgewater notes that a shift from climate leadership to energy pragmatism is driving capital to “the most economically viable energy sources.” In 2024, high-cost emerging technologies like hydrogen, CCS, and clean industry saw 40–50% investment drops.

Is renewable growth adding to fossil fuel use rather than replacing it?

Core argument: Renewables have grown as a share of total energy supply while fossil fuel production has risen in absolute terms, leaving total energy supply and greenhouse gas emissions at all-time highs — an energy addition rather than a transition.

We are looking at an energy addition, not an energy transition. Despite the last decade’s ambitious goals of investing in renewable energy and phasing out fossil fuels, what we’ve seen so far has been an addition of renewable energy supply, not a transition away from fossil fuels. With climate goals increasingly deprioritized and total demand for power continuing to increase, we would expect this trend to continue. While renewables have increased as a share of total energy supply, in absolute terms fossil fuel production has been rising as well. This nets out to total energy supply and greenhouse gas emissions being at all-time highs, reflecting the “all of the above” demand for greater quantity and redundancy in energy supply chains. The shift in policy priorities away from climate leadership will also drive a shift in investment toward the most economically viable energy sources—but renewables aren’t dead.

Takeaways by Macro Roundup® AI

  1. Renewables have grown as a share of total energy supply while fossil fuel production has risen in absolute terms, leaving total energy supply and greenhouse gas emissions at all-time highs — an energy addition rather than a transition.
  2. With climate goals increasingly deprioritized and total power demand continuing to rise, the pattern of adding renewable supply alongside fossil fuels is expected to continue.
  3. The shift in policy priorities away from climate leadership is expected to push investment toward the most economically viable energy sources, though renewables are not dead.

Related Articles:

  • Heliocentrism — An energy use must be electrified before green grid electricity can decarbonize it, and while US grid decarbonization continues at a steady pace, the electricity share of final US energy consumption has grown little. Transmission line growth runs well below Department of Energy targets for 2030 and 2035, and transformer delivery times have stretched from 4–6 weeks to 2–3 years.
  • The New Joule Order — Ample physical capacity keeps inflation low and stable and allows lower interest rates, but when demand catches up to capacity constraints, better returns in the physical economy pull capital back to fund expansion, making a commodity super-cycle a capital-expenditure cycle. In real terms, total energy investment is below its level 15 years ago.
  • The Climate Short: Hedge Funds Pile Up Huge Bets Against Green Future — An analysis of positions voluntarily disclosed by roughly 500 hedge funds found more funds are net short batteries, solar, electric vehicles and hydrogen than long them, while more are net long fossil fuels than short oil, gas and coal. This comes despite large green stimulus programs in the US, Europe and China.

Monday, April 7, 2025

AI Summary. US government bonds sold off, with yields rising by at least 20 basis points across all maturities and 30-year yields up nearly 23 basis points, amid signs investors were regaining appetite for risk. Traders' bets on Federal Reserve rate cuts fluctuated between three and five quarter-point reductions for the year.

Alice Gledhill, James Hirai and Liz Capo McCormick Bloomberg
Date Posted:

Despite the increased probability of a recession, 10-year yields rose 22bps to 4.22% from 4.01% at Friday’s close. The 30-year rose 23bps.

Do returning risk appetites push government bond yields sharply higher?

Core argument: Yields on 30-year US Treasury bonds rose nearly 23 basis points in late Monday trading, set for the biggest one-day increase since March 2020, with yields across all maturities up at least 20 basis points.

US government bonds tumbled Monday, erasing a portion of their biggest weekly advance since August, amid signs investors were momentarily regaining their appetite for risk. The historic selloff lifted yields across all maturities by at least 20 basis points during the session, with those on 30-year bonds higher by nearly 23 basis points in late trading — set for the biggest one-day increase since March 2020. There’s also potential for auctions later this week to reveal cracks in demand for US bonds, especially from foreign buyers. The Treasury will sell three and 10-year notes and 30-year bonds, starting on Tuesday. Traders’ bets on how much the Federal Reserve will lower interest rates this year fluctuated between three and five quarter-point cuts. Four reductions are now reflected in overnight interest-rate swaps this year, with the first fully priced in for June. A May reduction is seen as a coin toss.

Takeaways by Macro Roundup® AI

  1. Yields on 30-year US Treasury bonds rose nearly 23 basis points in late Monday trading, set for the biggest one-day increase since March 2020, with yields across all maturities up at least 20 basis points.
  2. Monday's selloff erased part of Treasuries' biggest weekly advance since August, amid signs investors were momentarily regaining their appetite for risk.
  3. Overnight interest-rate swaps reflect four quarter-point Federal Reserve cuts this year, with the first fully priced for June and a May reduction seen as a coin toss, as traders' bets fluctuated between three and five cuts.

Related Articles:

  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.
  • Germany’s Spending Push Drives Up Borrowing Costs Across Eurozone — Germany's planned defence spending has pushed 10-year German government bond yields close to 3%, lifting borrowing costs across the eurozone because German debt serves as the bloc's benchmark. Investors warn this intensifies pressure on heavily indebted economies; one simulation projects Italy's debt-to-GDP ratio reaching 153% and France's 122% by 2030 absent spending cuts or faster growth.
  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.

AI Summary. The US threatened to impose an additional 50% tariff on Chinese imports — raising the combined duty to 104% — unless China lifts the retaliatory levies it placed on American goods in response to new US duties.

Khushboo Razdan South China Morning Post
Date Posted:

Trump threatened China with an additional 50% tariff if China goes forward with its announced 34% retaliatory tariff in response to American levies. In total, Chinese imports to the US would face a combined duty of 104%.

Will the US raise tariffs on Chinese imports above 100%?

Core argument: US President Donald Trump threatened an additional 50% tariff on Chinese imports, which would bring the combined duty on Chinese goods entering the US to 104% if imposed on Wednesday.

US President Donald Trump warned China on Monday that its imports would face an additional 50% tariff – raising the total levy to more than 100% – unless it lifts the retaliatory levies it imposed on American goods in response to the Trump administration’s heavy new duties last week. If the new 50% tariffs are imposed on Wednesday, Chinese imports to the US would face a combined duty of 104%.

Takeaways by Macro Roundup® AI

  1. US President Donald Trump threatened an additional 50% tariff on Chinese imports, which would bring the combined duty on Chinese goods entering the US to 104% if imposed on Wednesday.
  2. Trump conditioned the additional 50% levy on China lifting the retaliatory tariffs Beijing imposed on American goods in response to the Trump administration's new duties last week.

Related Articles:

  • Markets Tumble as China Announces 34% Retaliatory Tariffs On US Imports — China announced 34% tariffs on all US imports in retaliation for new US duties on Chinese goods, which bring total US levies above the 60% Trump threatened during his campaign. China also banned exports of seven types of rare earths and added US drone makers to an "unreliable entity" list barring Chinese suppliers from selling them components.
  • Pettis On New Round Of American Tariffs — Bilateral tariffs mostly divert trade rather than shrink the overall US trade deficit, because they address neither the internal imbalances driving surplus countries' surpluses nor the US role in accommodating them. After an earlier round of US tariffs, the US deficit with China fell while both the overall US deficit and China's overall surplus rose.
  • The U.S. Trade Deficit: Myths and Realities — Taxing capital inflows would weaken the dollar but could raise domestic interest rates and depress investment, harming long-term growth, while an interest rate cut absent recession would be inflationary and erode any real depreciation needed to durably improve the trade balance. Fiscal restraint could weaken the dollar and reduce the trade deficit.

AI Summary. About 50% of earnings at the seven largest US technology companies come from abroad, versus 41% for the S&P 500, leaving them more exposed to a trade war that weighs more heavily on economies where trade is a bigger share of output. European retaliation via a digital services tax could further reduce their earnings.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk notes that Mag7 stocks will be disproportionately impacted by the trade war and could be “even more negatively impacted” by EU retaliation; 50% of the Mag7 earnings come from overseas, relative to 41% for the S&P 500.

Are the largest tech companies more exposed to a trade war?

Core argument: Roughly 50% of Magnificent 7 earnings come from abroad, above the 41% foreign share for the S&P 500 as a whole.

Roughly 50% of earnings in the Magnificent 7 come from abroad.That is higher than for the S&P 500, where the share is 41%. With trade making up a bigger share of GDP in the rest of the world than in the US, the trade war will have a disproportionately more negative impact on the rest of the world. As a result, the Magnificent 7 will be hit harder on their global earnings than other S&P 500 companies. Their earnings could be even more negatively impacted if Europe retaliates in the form of a digital services tax.

Takeaways by Macro Roundup® AI

  1. Roughly 50% of Magnificent 7 earnings come from abroad, above the 41% foreign share for the S&P 500 as a whole.
  2. With trade making up a bigger share of GDP outside the US, the trade war is expected to weigh more heavily on the rest of the world, hitting the Magnificent 7's global earnings harder than those of other S&P 500 companies.
  3. European retaliation in the form of a digital services tax could further reduce Magnificent 7 earnings.

Related Articles:

  • The Alchemists — NVIDIA's share of all US capital spending is projected to approach two 20th-century peaks by 2026, and large cloud providers would need $400–500bn in new revenue to earn their traditional 50% gross margin on roughly $250bn of annual data center spending. After the dot-com collapse, Corning's fiber optic revenues did not surpass 2000 levels until 2018 in nominal terms.
  • A Severe Case of COVIDIA: Prognosis For An AI-Driven US Equity Market — Computing cycles move from infrastructure to platforms to applications, and NVIDIA data center revenues as a share of market-wide capital spending are projected to reach levels last seen at the 1969 mainframe peak and the dot-com boom. Large cloud providers spend more than twice as much training foundational models as running them for customers.
  • Data Update 3 for 2025: The Times They Are A’changin! — Technology stocks added almost $4.63T in market capitalization in a single year and $13.6T over a decade, with semiconductor and auto gains concentrated in standout firms such as Nvidia and Tesla. Seven companies—Apple, Amazon, Meta, Alphabet, Microsoft, Nvidia and Tesla—added $15.8T over ten years, about 40% of the total gain across US stocks.

AI Summary. A classic 60% stock/40% bond portfolio sits at a six-month low while retaining most of its post-pandemic gains, and sharply wider credit spreads suggest a revival in recession risk. Contrary to the expectation that US tariffs would strengthen the dollar, the dollar fell even as money flowed into Treasuries.

John Authers Bloomberg
Date Posted:

As of Friday, a 60/40 index of equities and bonds is the lowest in six months. Yet @johnauthers argues, “It’s important not to overstate this. The market has swung away from a position that looked extreme.”

Are markets signaling rising recession risk and an unexpectedly weaker dollar?

Core argument: A classic 60/40 portfolio of 60% equities and 40% bonds sits at its lowest level in six months, a swing away from a position that looked extreme but no worse than that.

It’s important not to overstate this. The market has swung away from a position that looked extreme. A 60/40 index (the classic 60% equities 40% bonds allocation) is the lowest in six months, but no worse than that. Similarly, stocks relative to bonds, as proxied by the popular SPY and TLT exchange-traded funds, have lost a lot of ground, but have held onto most of their post-pandemic gains. Retirement funds haven’t been wiped out. Keep this in proportion; while remembering that there’s also plenty of room below for this to go much further. In credit, spreads have widened sharply, suggesting a revival in recession risk. The most important issue concerns the dollar. It has been taken as a given over the last few months that US tariffs would mean a stronger dollar. Markets attempt to counteract the impact of the levies, as tariffs should mean higher inflation which would mean higher rates. Whenever risk spikes, investors take refuge in the US, even if it’s the epicenter of the problem. But not this time. The dollar tanked on Thursday, even as money poured into Treasuries.

Takeaways by Macro Roundup® AI

  1. A classic 60/40 portfolio of 60% equities and 40% bonds sits at its lowest level in six months, a swing away from a position that looked extreme but no worse than that.
  2. Stocks relative to bonds, proxied by the SPY and TLT exchange-traded funds, have lost a lot of ground while holding onto most of their post-pandemic gains, leaving retirement funds far from wiped out.
  3. The dollar tanked on Thursday even as money poured into Treasuries, defying the assumption that US tariffs would mean a stronger dollar, while credit spreads widened sharply, suggesting a revival in recession risk.

Related Articles:

  • The Great European Disentanglement From US Stocks Has Only Just Started — Federal Reserve data show European investors held about $9tn in US stocks, roughly 17% of the total value of the US market. After inflation, a dollar invested in the US at the start of 2000 was worth $3.28 by the end of 2024, versus $1.63 for the rest of the world.
  • That Smashing Sound Is Piggy Banks Around the World — US assets have boomed relative to the rest of the world since the global financial crisis, with European holdings of US stocks growing substantially as inflows lifted the dollar and raised returns for foreign investors, drawing in more funds. Foreign investors now have an incentive to take those considerable profits.
  • Why the Dollar is Depreciating Today — Trade restrictions strengthen the dollar all else equal, so the dollar's depreciation after new tariffs is best explained by reduced investor confidence in the U.S. economic outlook. That same loss of confidence is reflected in U.S. stocks declining relative to foreign markets and risks an unwinding of overweight positions in U.S. assets.

AI Summary. The authors argue the administration's tariff formula wrongly uses the responsiveness of retail prices to tariffs (0.25) instead of import prices (about 0.945), which research finds are passed through almost fully. Correcting this would cut the announced tariffs to roughly a quarter of their level, leaving most countries at the 10% floor.

Kevin Corinth and Stan Veuger American Enterprise Institute
Date Posted:

USTR’s calculations “base the elasticity on the response of retail prices to tariffs, as opposed to import prices as they should have done.” “For all but a few countries, the tariff [should] be exactly 10%, the administration’s floor.” @stanveuger

Does using retail instead of import price responsiveness overstate the tariff formula?

Core argument: The elasticity of import prices with respect to tariffs should be about one (0.945), not the 0.25 the Trump Administration states, whose figure relies on the response of retail prices to tariffs rather than import prices.

The elasticity of import prices with respect to tariffs should be about one (actually 0.945), not 0.25 as the Trump Administration states. Their mistake is that they base the elasticity on the response of retail prices to tariffs, as opposed to import prices as they should have done. The article they cite by Alberto Cavallo and his coauthors makes this distinction clear. The authors state that “tariffs [are] passed through almost fully to US import prices,” while finding “more mixed evidence regarding retail price increases.” It is inconsistent to multiply the elasticity of import demand with respect to import prices by the elasticity of retail prices with respect to tariffs. Correcting the Trump Administration’s error would reduce the tariffs assumed to be applied by each country to the United States to about a fourth of their stated level, and as a result, cut the tariffs announced by President Trump on Wednesday by the same fraction, subject to the 10% tariff floor. As shown in Table 1, the tariff rate would not exceed 14% for any country. For all but a few countries, the tariff would be exactly 10%, the floor imposed by the Trump Administration.

Takeaways by Macro Roundup® AI

  1. The elasticity of import prices with respect to tariffs should be about one (0.945), not the 0.25 the Trump Administration states, whose figure relies on the response of retail prices to tariffs rather than import prices.
  2. Alberto Cavallo and coauthors, cited by the Trump Administration, state that tariffs are passed through almost fully to US import prices while finding more mixed evidence regarding retail price increases.
  3. Correcting the error would cut the tariffs announced by President Trump to about a fourth of their stated level, subject to the 10% floor, leaving no country above 14% and all but a few at exactly 10%.

Related Articles:

  • Liberation Day — US "reciprocal" tariff rates were set at roughly half of each country's bilateral trade balance as a share of its imports, with a 10% floor, so they bear little relation to standard measures of trade distortions. Because rates track bilateral deficits, the author argues negotiations are unlikely to deliver quick tariff reductions.
  • Without Spending Cuts, Brace for Slow Growth — The author argues that US trade deficits have funded debt-financed consumption rather than domestic business investment, noting that since 2000 real interest rates have tended to fall as trade deficits widen while business investment has been uncorrelated with both. If tariffs shrink trade deficits, interest rates could rise and worsen America's fiscal balance.
  • Trump’s Tariffs Are Designed for Maximum Damage—to America — The US goods trade deficit, 4.2% of GDP in 2024, reflects Americans spending more than they produce and will persist until spending falls relative to income, such as through a narrower federal budget deficit. Targeting bilateral deficits can only shift them between countries while curtailing gains from trade.

AI Summary. In a pre-registered lab experiment, performance on an "AI leadership test," in which people directed teams of agents built with large language models, predicted leaders' measured causal contribution to teams of human followers. The authors find similar leader characteristics and skill profiles predict success on both tests.

Ben Weidmann, Yixian Xu and David Deming National Bureau of Economic Research
Date Posted:

Human leaders’ success in directing teams of AI agents is highly correlated with these leaders’ effect on the productivity of human teams, suggesting “LLM agents can be used to measure individual differences in leadership skills.” @ProfDavidDeming

Does leading AI agents predict how well someone leads people?

Core argument: In a large pre-registered lab experiment, leadership skill measured by directing teams of AI agents built with large language models predicted leadership skill with human groups.

We show that leadership skill with artificially intelligent (AI) agents predicts leadership skill with human groups. In a large pre-registered lab experiment, human leaders worked with AI agents to solve problems. This paper asks whether agents created with large language models (LLMs) can be used to effectively simulate human interaction in team settings. In a large pre-registered lab study we demonstrate that LLM agents can be used to measure individual differences in leadership skills. In the experiment, human leaders solve a series of collaborative problems by directing teams of AI agents. We compare performance on this ‘AI leadership test’ to a ground truth, in which we estimate each leader’s causal contribution to human teams by repeatedly randomly assigning leaders to multiple teams of human followers. If the AI Leadership Test does a good job of replicating the ground-truth test, we would expect that similar leader characteristics and skill profiles would predict success on both tests. This is what we find.

Takeaways by Macro Roundup® AI

  1. In a large pre-registered lab experiment, leadership skill measured by directing teams of AI agents built with large language models predicted leadership skill with human groups.
  2. The authors establish a ground truth by repeatedly randomly assigning leaders to multiple teams of human followers to estimate each leader's causal contribution to team performance.
  3. Similar leader characteristics and skill profiles predicted success on both the AI leadership test and the human-team ground-truth test, supporting the use of LLM agents to measure individual differences in leadership skill.

Related Articles:

  • The Rapid Adoption of Generative AI — A nationally representative U.S. survey found 39% of people aged 18-64 used generative AI, with more than 24% of workers using it in the prior week and nearly one in nine using it every workday. The authors estimate 0.5-3.5% of U.S. work hours are currently assisted by generative AI.
  • Technological Disruption in the Labor Market — The authors measure US labor market structure since 1880 and find 1990–2017 less disruptive than any earlier period, because past changes from general-purpose technologies like steam and electricity were so profound. They identify four recent signs of accelerating change, including a 50%+ rise in science and technology employment share since 2010.
  • The Cybernetic Teammate: A Field Experiment on Generative AI Reshaping Teamwork and Expertise — In a pre-registered field experiment with 776 professionals at Procter & Gamble working on real product innovation challenges, individuals using AI matched the performance of two-person teams without AI. Professionals using AI also produced solutions balancing technical and commercial considerations regardless of their functional background.