Edward Conard

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Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, April 9, 2025

AI Summary. The US paused higher reciprocal tariffs on dozens of trade partners for 90 days, lowering the rate to a 10% baseline, while raising duties on Chinese imports to 125%. The reversal followed market turmoil and recession fears after the higher duties took effect, and pressure from business leaders and investors.

Skylar Woodhouse Bloomberg
Date Posted:

The USA paused tariff implementation above 10% for 90 days “on dozens of trade partners” that have not “retaliated” or balked at negotiations, while raising duties on China to 125%, in retaliation for its “refusal to negotiate.”

Did market turmoil prompt a pause on higher tariffs for most countries?

Core argument: Trump announced a 90-day pause on higher reciprocal tariffs for dozens of trade partners, lowering their rate to the 10% baseline, roughly 13 hours after higher duties on 56 nations and the European Union took effect.

President Donald Trump said he would pause higher reciprocal tariffs for 90 days on dozens of trade partners, while raising duties on China to 125%. The president’s about-face comes roughly 13 hours after higher reciprocal duties on 56 nations and the European Union went into effect, a move that fueled market turmoil and stoked recession fears. The president came under massive pressure from business leaders and investors to reverse course. “I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately,” Trump posted on social media. It wasn’t immediately clear which nations would receive tariff relief. Those who do would still be taxed at the 10% baseline rate that went into effect on Saturday. Trump said that more than 75 countries had contacted his administration to negotiate on trade barriers and “have not, at my strong suggestion, retaliated in any way, shape, or form.” Trump also said he was raising rates on China over its refusal to negotiate. The president had previously imposed a 104% charge on Chinese imports, which Beijing responded to with a 84% charge on American goods.

Takeaways by Macro Roundup® AI

  1. Trump announced a 90-day pause on higher reciprocal tariffs for dozens of trade partners, lowering their rate to the 10% baseline, roughly 13 hours after higher duties on 56 nations and the European Union took effect.
  2. Trump raised duties on Chinese imports to 125% over Beijing's refusal to negotiate, up from a previously imposed 104% charge, which China had answered with an 84% charge on American goods.
  3. Trump's about-face followed market turmoil and recession fears and pressure from business leaders and investors, and he said more than 75 countries had contacted his administration to negotiate without retaliating.

Related Articles:

  • The Evolution of Global Trade in 2024 — Global trade imbalances consist of one very large surplus and one very large deficit: China's goods surplus exceeds $1tn a year, while the U.S. non-petroleum deficit drives the Asian surplus. The author argues a Chinese surplus this large can be sustained only alongside a large U.S. deficit.
  • China’s Stunning 2024 Export Growth — Chinese export volumes are up 13% year-over-year while import volumes are up only 2%, a gap that with exports at about 20% of GDP implies a net exports contribution to Chinese growth of close to 2% of GDP. Falling Chinese export prices mean export volumes are growing much faster than the dollar value of exports.
  • How German Industry Can Survive the Second China Shock — The European Union has 30mm manufacturing jobs, and China has grown from a $4tn economy producing under 15% of global manufacturing output to an $18tn economy producing over a third, with well over 50% of global capacity in many sectors. European tariffs on Chinese electric vehicles limit import competition but do not offset lost export markets.

AI Summary. China imposed an 84% tariff on all imports from the US, hours after US duties on Chinese goods reached 104%. Goldman Sachs economists estimate that for 36% of US imports from China, American buyers have limited ability to find alternative suppliers even with substantial tariffs.

Bloomberg Staff Bloomberg
Date Posted:

A Goldman Sachs analysis finds that American firms will have a “limited ability” to find alternative suppliers for 36% of American imports originating in China.

Can American buyers replace Chinese imports when tariffs rise sharply?

Core argument: China's Finance Ministry said it will impose an 84% tariff on all US imports starting April 10, hours after US duties on Chinese goods reached 104% this year with the steepest American tariff in a century taking effect.

The Chinese government will impose an 84% tariff on all imports from the US starting April 10, the Finance Ministry said in a statement Wednesday. China’s move came hours after America’s steepest tariff in a century went into force, taking Trump’s duties on Beijing this year to 104%. While Trump’s tariffs have piled pressure on the Chinese export machine that last year contributed to about a third of growth, the US economy is also at risk. Goldman Sachs economists including Andrew Tilton wrote in a note that for 36% of US imports from China, American buyers have a “limited ability” to find alternative suppliers, even with substantial tariffs.

Takeaways by Macro Roundup® AI

  1. China's Finance Ministry said it will impose an 84% tariff on all US imports starting April 10, hours after US duties on Chinese goods reached 104% this year with the steepest American tariff in a century taking effect.
  2. Goldman Sachs economists including Andrew Tilton wrote that for 36% of US imports from China, American buyers have a "limited ability" to find alternative suppliers, even with substantial tariffs.
  3. China's export machine, which contributed to about a third of the country's growth last year, faces added pressure from Trump's tariffs, while the US economy is also at risk.

Related Articles:

  • Trump’s Tariffs and China Collide to Shock the $115 Trillion Global Economy — Bloomberg Economics projects that if US tariffs stand and targeted countries retaliate with duties half as large, US goods imports would be about 30% lower by 2030 than otherwise, with China's exports to the US falling 85%. China is expected to redirect most of those exports to other markets, amplifying pressure on economies already losing US sales.
  • China Offers First Hint of Devaluation With Weak Renminbi Fix — China's central bank set the renminbi's daily fixing rate just below 7.2 to the dollar, its weakest level in 18 months, signaling it may permit depreciation to offset US tariffs. Many economists believe Beijing will avoid a large devaluation because it would risk capital outflows and domestic instability.
  • 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. A $39bn auction of 10-year U.S. Treasury notes drew strong investor demand, lifting bond prices and paring a rise in yields. Investors had feared a weak auction would deepen the selloff amid concerns that aggressive U.S. tariff actions could shrink foreign demand for Treasuries.

Sam Goldfarb Wall Street Journal
Date Posted:

A $39B auction of 10-year Treasuries Wednesday was met with strong demand; yields fell to 4.35% from over 4.5% overnight.

Is foreign demand for Treasuries holding up despite tariff concerns?

Core argument: A $39 billion auction of 10-year U.S. Treasury notes drew strong investor demand, lifting bond prices and paring the rise in Treasury yields.

Bond prices are rebounding after a much-anticipated $39 billion government auction of 10-year U.S. Treasury notes met with strong demand from investors. Treasury yields, which rise when bond prices fall, have surged this week, raising fears among investors that a bad auction would intensify the selloff. Investors have been concerned that foreign demand for Treasuries could shrink in response to President Trump’s aggressive tariff actions.

Takeaways by Macro Roundup® AI

  1. A $39 billion auction of 10-year U.S. Treasury notes drew strong investor demand, lifting bond prices and paring the rise in Treasury yields.
  2. Treasury yields surged, leaving investors concerned that a weak 10-year auction would intensify the selloff in government bonds.
  3. Investors have worried that foreign demand for U.S. Treasuries could shrink in response to President Trump's aggressive tariff actions.

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.
  • 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.
  • Brazil’s Slow-Burning Economic Crisis Might Be the U.S. Future — Brazil illustrates a feedback loop in which higher interest rates raise debt-servicing costs—now over 7% of GDP—which in turn lift risk premia and inflation expectations, making fiscal policy less sustainable still. U.S. long-term rates have not fallen despite Federal Reserve cuts, partly reflecting an $11tn debt increase and markets pricing the risk that debt is managed through higher inflation.

AI Summary. US Treasury yields rose sharply, with the 10-year yield climbing to 4.51% before easing to 4.35% and the 30-year briefly above 5%, as investors shifted out of low-risk assets into cash amid tariff-driven volatility. Investors and analysts attributed the sell-off partly to hedge funds unwinding trades that exploit price gaps between Treasuries and futures or interest rate swaps.

Arjun Neil Alim, Harriet Agnew, Costas Mourselas and Kate Duguid Financial Times
Date Posted:

The 10-year US Treasury yield, at 3.9% earlier this week, jumped to 4.51% before falling back to 4.35% while the 30-year briefly rose above 5%, “the latest signs of investors moving out of low-risk assets and into cash.”

Are investors abandoning Treasuries as a safe haven?

Core argument: The 10-year US Treasury yield jumped to 4.51% before easing to 4.35%, up 0.19 percentage points on the day and rising from below 3.9% earlier in the week, while the 30-year yield briefly topped 5%.

The 10-year US Treasury yield jumped to 4.51% before falling back to 4.35% — up 0.19 percentage points on the day — while the 30-year yield briefly rose above 5%. The 10-year yield has risen from less than 3.9% earlier this week. The sell-off is the latest sign of investors moving out of low-risk assets and into cash, as Trump’s tariffs on major trading partners spark intense volatility in markets. Investors and analysts pointed to the misfiring of popular trades that aim to exploit differences in price between Treasuries and associated futures contracts, known as the “basis trade”, or between Treasuries and interest rate swaps. As hedge funds cut back on risk and exit those trades, they have been selling Treasuries, piling pressure on markets. In another sign of stress in markets, spreads between Treasury yields and interest rate swaps have widened sharply.

Takeaways by Macro Roundup® AI

  1. The 10-year US Treasury yield jumped to 4.51% before easing to 4.35%, up 0.19 percentage points on the day and rising from below 3.9% earlier in the week, while the 30-year yield briefly topped 5%.
  2. Investors and analysts pointed to the misfiring of trades exploiting price differences between Treasuries and futures contracts, known as the "basis trade", or between Treasuries and interest rate swaps, with hedge funds selling Treasuries as they cut risk.
  3. Spreads between Treasury yields and interest rate swaps have widened sharply, a sign of market stress, as Trump's tariffs on major trading partners spark volatility and investors move out of low-risk assets into cash.

Related Articles:

  • What Is the Basis Trade? — The Treasury basis trade — leveraged hedge fund bets, sometimes up to 100x, on convergence between Treasury cash and futures prices — stands at roughly $800bn within $2tn of outstanding prime brokerage balances. An exogenous shock could force a rapid unwind of these positions, disrupting broker-dealer market functions.
  • The World Is Finding a Plausible Alternative to Treasuries — Rising German and Japanese 10-year government bond yields—around 2.66% and 1.25%—make those markets more attractive than US Treasuries for European and Japanese investors who hedge their dollar exposure, potentially shifting allocations toward home markets. Foreign investors own about a third of the Treasury market, mostly in longer maturities.
  • 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.

AI Summary. West Texas Intermediate crude near $57 sits below the price US oil executives say new wells need to break even, according to a Federal Reserve Bank of Dallas survey, discouraging them from expanding supply. S&P Global Commodity Insights projects $50 oil could cut output by over 1m barrels a day.

Kevin Crowley, David Wethe, and Emma Sanchez Bloomberg
Date Posted:

Crude is hovering under the $65 breakeven level a Dallas Fed survey of producers suggests is needed to sustain new production. If the price were to fall below $50, output in the ”lower 48 states” could drop by 1mm bpd, 7% of the current US total.

Are oil prices now too low for US producers to expand supply?

Core argument: West Texas Intermediate crude has fallen about 27% since Trump's inauguration to roughly $57 a barrel, below the breakeven level executives say new wells require, according to a Federal Reserve Bank of Dallas survey.

The growing unease reflects how Trump’s effort to re-write global trade rules is undermining his goal to supercharge US fossil-fuel production and achieve “energy dominance.” Executives are loathe to boost US oil supply with West Texas Intermediate down about 27% since Trump’s inauguration less than three months ago. It’s now hovering around $57, below the level they say they need for new wells to break even, according to a survey by the Federal Reserve Bank of Dallas. If prices fall to $50 a barrel, production in the Lower 48 states could drop by more than 1 million barrels a day over the next 12 months, according to S&P Global Commodity Insights. That’s about 7% of the current US total.

Takeaways by Macro Roundup® AI

  1. West Texas Intermediate crude has fallen about 27% since Trump's inauguration to roughly $57 a barrel, below the breakeven level executives say new wells require, according to a Federal Reserve Bank of Dallas survey.
  2. S&P Global Commodity Insights estimates that if oil falls to $50 a barrel, Lower 48 production could drop by more than 1 million barrels a day over the next 12 months, about 7% of the current US total.
  3. Trump's effort to re-write global trade rules is undermining his goal of supercharging US fossil-fuel production and achieving "energy dominance," with Texas oil executives reluctant to boost supply at current prices.

Related Articles:

  • Oil Was Written Off. Now It’s the Most Productive US Industry — US oil and gas extraction productivity nearly tripled in a decade, and crude output reached a record 13.3m barrels a day — 48% above Saudi Arabia — with under a third of the rigs. BloombergNEF projects production growth of 600,000 barrels a day on higher well productivity.
  • U.S. Crude Oil Production Established A New Record In August 2024 — U.S. crude oil production averaged a record 13.4m barrels per day in August, topping the prior monthly record of 13.3m barrels per day. The U.S. Energy Information Administration forecasts annual production averaging 13.2m barrels per day, above the 12.9m annual record, and 13.5m barrels per day the following year.
  • 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.

Thursday, April 10, 2025

AI Summary. The authors estimate that 2025 tariffs bring the average effective tariff rate on consumers to 27%, the highest since 1903, raising short-run prices by 2.9%, equivalent to an average household loss of $4,700. They project the US economy remains 0.6% smaller over the long run and that the tariffs raise $2.4tn over 2026–35.

Ernie Tedeschi Yale University
Date Posted:

The revised tariffs brought the mean effective US tariff rate to 27%, implying an average annual cost to households of $4,700 in 2024$. Apparel prices rise 64% in the short-run, and stay 27% higher in the long-run. @ernietedeschi.

How much do 2025 tariffs cost households and the economy?

Core argument: Consumers face an overall average effective tariff rate of 27%, the highest since 1903, with all 2025 tariffs raising the short-run price level by 2.9%, equivalent to an average consumer loss of $4,700 per household in 2024 dollars.

Consumers face an overall average effective tariff rate of 27%, the highest since 1903. The price level from all 2025 tariffs rises by 2.9% in the short-run, the equivalent of an average per household consumer loss of $4,700 in 2024$. The post-substitution price increase settles at 1.7%, a $2,700 loss per household. Tariffs are a regressive tax, especially in the short-run. The average annual cost to households in the 2nd, 5th, and top decile rise to $2,100; $3,700; and $10,000 respectively. The 2025 tariffs disproportionately affect clothing and textiles, with consumers facing 64% higher apparel prices in the short-run. Apparel prices stay 27% higher in the long-run. US real GDP growth is -1pp lower from all 2025 tariffs. In the long-run, the US economy is persistently -0.6% smaller respectively, the equivalent of $170 billion annually in 2024$. The unemployment rate rises 0.6 percentage point by the end of 2025, and payroll employment is 740,000 lower. All tariffs to date in 2025 raise $2.4 trillion over 2026-35, with $587 billion in negative dynamic revenue effects.

Takeaways by Macro Roundup® AI

  1. Consumers face an overall average effective tariff rate of 27%, the highest since 1903, with all 2025 tariffs raising the short-run price level by 2.9%, equivalent to an average consumer loss of $4,700 per household in 2024 dollars.
  2. Tariffs are a regressive tax, especially in the short run, with average annual household costs of $2,100 in the 2nd decile, $3,700 in the 5th, and $10,000 in the top decile; apparel prices rise 64% in the short run and remain 27% higher in the long run.
  3. All 2025 tariffs lower US real GDP growth by 1 percentage point and leave the economy persistently 0.6% smaller, equivalent to $170 billion annually in 2024 dollars, with unemployment 0.6 percentage point higher by the end of 2025 and payroll employment 740,000 lower.

Related Articles:

  • Help for the Heartland? The Employment and Electoral Effects of the Trump Tariffs in the United States — The authors find that the combined effect of U.S.-China trade war import tariffs, retaliatory tariffs, and farm subsidies on employment in exposed U.S. locations was at best a wash and possibly mildly negative, while residents of tariff-protected areas became less likely to identify as Democrats and more likely to vote Republican.
  • Steel Productivity has Plummeted Since Trump’s 2018 Tariffs — Output per hour in the U.S. steel industry has fallen 32% since 2017, following the imposition of 25% tariffs on steel imports, while output per hour for the economy as a whole rose 15%. U.S. steel-using firms, which employ roughly 45x as many Americans as steel producers, pay about 75% more for steel than global competitors.
  • Did Tariffs Make American Manufacturing Great? New Evidence from the Gilded Age — Using digitized industry-level US tariff data from 1870–1900 matched to state-level manufacturing census data for over 80 industries, the authors estimate that tariffs reduced labor productivity. They argue the results are consistent with weaker international competition allowing less efficient firms to survive, reduced incentives to innovate, and lobbying for protection misallocating resources.

AI Summary. The U.S. goods trade deficit reached a record $1.21tn while its services trade surplus rose to $295bn from $77bn in 2000, reversing a mid-20th-century pattern of goods surpluses and services deficits.

Konrad Putzier and Alana Pipe Wall Street Journal
Date Posted:

The US ran a service surplus of $295B in 2024 up from $77B in 2000. While it’s hard to tariff services, if the trade war escalates, countries could “tax, fine or even ban U.S. companies.”

Does the trade deficit in goods overlook a growing services surplus?

Core argument: The U.S. goods trade deficit reached a record $1.21 trillion in 2024 as imports of foreign manufactures rose and domestic factories closed.

For decades, the U.S. and the rest of the world had a deal: Other countries sent cars, phones, clothes and food to the U.S., and in return they got bonds, software and management consultants. As the U.S. imported more goods from abroad and domestic factories closed, its goods trade deficit swelled to a record $1.21 trillion by 2024. At the same time, the U.S. services trade surplus grew to $295 billion last year, up from $77 billion in 2000. This is a stark reversal from the mid-20th century, when the U.S. was a manufacturing giant and had a goods export surplus, but had a services trade deficit.

Takeaways by Macro Roundup® AI

  1. The U.S. goods trade deficit reached a record $1.21 trillion in 2024 as imports of foreign manufactures rose and domestic factories closed.
  2. The U.S. services trade surplus grew to $295 billion in 2024, up from $77 billion in 2000, with exports including bonds, software and management consulting.
  3. The current U.S. trade pattern reverses that of the mid-20th century, when the U.S. was a manufacturing giant running a goods export surplus alongside a services trade deficit.

Related Articles:

  • Message to President Trump: We (Europe) Take As Much From You (The US) As You Take From Us — The US trade deficit with the euro area in goods and services combined is about €57bn, under 0.2% of US GDP, and the euro area pays roughly €49bn more in investment income and wages to the US than it receives. Counting these flows, the euro area's current account with the US is effectively balanced.
  • Magnificent 7 Hit Harder by Global Slowdown and Potential Retaliation — 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.
  • Trump Widens Trade Fight to Include Global Taxes and Regulation — The US has directed economic officials to calculate new country-by-country "reciprocal" tariffs based on the total tariff, tax, regulatory, currency and other barriers facing US exports, treating value-added taxes as a trade barrier. If value-added tax rates are added to existing tariff rates, India would face the highest rate at 29%, followed by Brazil and the European Union.

AI Summary. Leading AI labs require tens of $bn in capital spending to keep improving their systems, and a rising cost of capital could produce a short-term slowdown in AI infrastructure buildout. GPU servers are largely exempt from tariffs, and datacenter construction cost increases likely raise operators' total cost of ownership by under 2%.

Dylan Patel, Jeremie Eliahou Ontiveros, Maya Barkin, Patrick Zhou, Jeff Koch, Sravan Kundojjala, Reyk Knuhtsen, Christopher Seifel and Wega Chu Semianalysis
Date Posted:

Tariffs are unlikely to have a major impact on American hyperscalers who in fact contribute to the US service surplus. Total cost of ownership impact for GPU cloud operators is likely < 2%, according to @SemiAnalysis.

How much do tariffs and capital costs affect AI buildout?

Core argument: Datacenter construction costs could rise by mid-to-high single digits from tariffs, but the total cost of ownership impact for GPU cloud operators is likely under 2%, with GPU servers largely exempted.

With Scaling Laws still very much alive, tens of billions of dollars of capital expenditures are required by leading AI Labs to keep improving the quality of their products & systems at this incredible pace. Cost of capital is rising, with soaring 10-year interest rates, and the tightening of financial conditions could likely lead to a short-term slowdown in the AI infrastructure buildout. Retaliatory tariffs targeting US Big Tech are possible but unlikely to have a major short-term impact on US hyperscalers. Despite running large trade deficits on goods, the US actually runs surpluses with services – helped by its technology giants. GPU servers are largely exempted from tariffs. Mexico is already a large assembly hub and will take a central role in this new world order. Datacenter construction costs could increase by mid-to-high single digits – but the total coast of ownership impact for GPU cloud operators is likely less than 2%.

Takeaways by Macro Roundup® AI

  1. Datacenter construction costs could rise by mid-to-high single digits from tariffs, but the total cost of ownership impact for GPU cloud operators is likely under 2%, with GPU servers largely exempted.
  2. Leading AI labs require tens of billions of dollars of capital expenditures to keep improving their products under still-intact scaling laws, and soaring 10-year interest rates plus tightening financial conditions could lead to a short-term slowdown in the AI infrastructure buildout.
  3. Retaliatory tariffs aimed at US Big Tech are possible but unlikely to have a major short-term impact on US hyperscalers, as the US runs services surpluses helped by its technology giants despite large goods trade deficits.

Related Articles:

  • Microsoft Pulls Back on Data Centers From Chicago to Jakarta — 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.
  • 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.
  • 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.

AI Summary. Foreign investors hold $19tn in US equities, $7tn in Treasuries, and $5tn in US credit, corresponding to 20% of US equities and 30% each of Treasuries and credit outstanding.

Torsten Sløk Apollo
Date Posted:

Foreigners own 20% of US equities, 30% of Treasuries, and 30% of credit outstanding.

How much of US equities, Treasuries, and credit do foreigners own?

Core argument: Foreign investors hold $19 trillion in US equities, equal to 20% of US equities outstanding.

Foreigners own $19 trillion in US equities, $7 trillion in Treasuries, and $5 trillion in US credit. That corresponds to 20% of US equities, 30% of Treasuries, and 30% of credit outstanding.

Takeaways by Macro Roundup® AI

  1. Foreign investors hold $19 trillion in US equities, equal to 20% of US equities outstanding.
  2. Foreign investors hold $7 trillion in US Treasuries and $5 trillion in US credit, each equal to 30% of the respective amount outstanding.

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.
  • US Exceptionalism: Drivers of Equity Outperformance and What’s Needed for a Repeat — US companies need about 7% earnings-per-share growth to deliver a normal 4% equity risk premium above the risk-free rate, versus about 3% for other developed markets, with the highest expectations embedded in technology and the largest US tech firms. Chinese companies could generate a 4% risk premium over Chinese bonds with no earnings growth.
  • European vs. US Stocks: Which Market Comes Out On Top? — Since MSCI data began in 1970, US stocks have outperformed European stocks by an average of 0.8 percentage points per year, with $1 invested in 1970 growing to $268 in the US versus $141 in Europe over 55 years. Before the financial crisis the ranking was reversed, with the US gain equal to 57% of the European gain.

AI Summary. JPMorgan Chase estimates Treasury yields rise a third of a percentage point for each $300bn decline in foreign official holdings of US Treasuries. Carlyle Group notes gold has strongly outperformed inflation-protected Treasuries, suggesting gold is now the world's preferred safe-haven asset as reserve managers grow more hesitant to add Treasury exposure.

Greg Ip Wall Street Journal
Date Posted:

JPM estimates Treasury yields rise 33 bps for each $300B decline in foreign official holdings. Jason Thomas of Carlyle notes that since the start of 2022, gold has outperformed TIPS, suggesting Treasuries are now less appealing as a safe haven asset.

Is gold replacing Treasuries as the world's preferred safe-haven asset?

Core argument: Jay Barry, head of global rates strategy at JPMorgan Chase, estimates that Treasury yields rise by a third of a percentage point for every $300 billion decline in foreign official holdings of Treasuries.

Jay Barry, head of global rates strategy at JPMorgan Chase, estimates that yields rise a third of percentage point for each $300 billion decline in foreign official holdings of Treasuries. Jason Thomas, head of global research at Carlyle Group, noted that since early 2022, gold has strongly outperformed inflation-protected Treasuries, suggesting that gold is now the world’s preferred safe-haven asset. Thomas said that after Russia invaded Ukraine, the U.S. and its allies froze the Russian central bank’s foreign-exchange reserves. In recent months, Trump’s policies suggest the U.S. will play a less central role in global trade, making the dollar less important for invoicing exports and imports, he added. As a result, Thomas said, “The global community and central bank reserve managers are just a bit more hesitant when it comes to adding to Treasury exposure.”

Takeaways by Macro Roundup® AI

  1. Jay Barry, head of global rates strategy at JPMorgan Chase, estimates that Treasury yields rise by a third of a percentage point for every $300 billion decline in foreign official holdings of Treasuries.
  2. Jason Thomas, head of global research at Carlyle Group, notes that gold has outperformed inflation-protected Treasuries since early 2022, suggesting gold is now the world's preferred safe-haven asset.
  3. Thomas links the U.S. and allied freeze of Russian central bank reserves after the invasion of Ukraine, and Trump policies pointing to a less central U.S. role in global trade, to reserve managers' greater hesitance to add Treasury exposure.

Related Articles:

  • The Move in Long Rates Is Very Unusual — The Federal Reserve has cut its policy rate by 100 basis points while 10-year interest rates have risen by 100 basis points over the same stretch, a highly unusual divergence. Possible explanations include fiscal worries, weaker foreign demand for U.S. debt, or rate cuts that were not justified.
  • Larry Summers and Bob Rubin Join Our CIOs to Discuss the Surprising Economic Cycle — Adopting the Simpson-Bowles fiscal consolidation when interest rates were at zero would have risked excessive disinflation, since long rates had no room to fall to provide an offsetting expansionary impulse. After the large run-up in debt and rise in real interest rates, the developing fiscal situation risks inflationary pressure, Treasury market disruption, or crowding out of private investment.
  • 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. Bloomberg Economics estimates that 100% US tariffs on Chinese goods would virtually eliminate US imports from China over the medium term. Companies including BASF, Ford, Ingersoll Rand and Tesla have filed more than 1,100 requests for exemptions on Chinese machinery they say they need to set up or expand US production lines.

Enda Curran, James Mayger and Shawn Donnan Bloomberg
Date Posted:

Bloomberg Economics estimates “Capital and intermediate goods make up around 43% of total imports from China,” which will force American manufacturers to pay the tariffs until substitutes can be found and “may mean a loss of US jobs in the short run.”

Would 100% tariffs eliminate US imports from China?

Core argument: Bloomberg Economics estimates that 100% US tariffs on Chinese goods would virtually wipe out all US imports from China over the medium term.

Bloomberg Economics estimates that 100% US tariffs on Chinese goods would virtually wipe out all US imports from the Asian manufacturing powerhouse over the medium term. Businesses big and small are already anticipating a hit and asking for exemptions from the China tariffs. Companies including global giants like BASF, Ford, Ingersoll Rand and even Tesla have filed more than 1,100 requests already for exemptions from tariffs on machinery from China that they say they need to set up or expand production lines in the US. Capital and intermediate goods make up around 43% of total imports from China, meaning “there is the perverse possibility that if those goods do not come into the US, it may slow down manufacturing in the US, and it may mean a loss of jobs in the short run,” said Olu Sonola, head of US economic research at Fitch Ratings.

Takeaways by Macro Roundup® AI

  1. Bloomberg Economics estimates that 100% US tariffs on Chinese goods would virtually wipe out all US imports from China over the medium term.
  2. Companies including BASF, Ford, Ingersoll Rand and Tesla have filed more than 1,100 requests for exemptions from tariffs on Chinese machinery they say they need to set up or expand US production lines.
  3. Capital and intermediate goods account for around 43% of total US imports from China, which Fitch Ratings' Olu Sonola says raises the perverse possibility of slower US manufacturing and short-run job losses if those goods stop arriving.

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