Edward Conard

Top Ten New York Times Bestselling Author

  • “…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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, April 24, 2025

AI Summary. European and Japanese investors hold roughly 30% and 20% of their fixed income in foreign debt, versus under 10% for US investors, with US bonds making up about 15% of Eurozone and Japanese portfolios. Because foreign investors are less sticky than domestic ones, turmoil in US bond markets has greater potential to unsettle them.

Jens Nordvig and Alex Etra Money: Inside and Out
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Capital flows suggest a strategic shift out of dollar assets is underway. “A long list of different types of investors will be looking to reduce USD exposure if they can find a way to do so.” @EtraAlex @jnordvig

Does heavy foreign exposure make US bond turmoil more unsettling?

Core argument: Foreign debt securities make up roughly 30% of European investors' and 20% of Japanese investors' total fixed income holdings, versus under 10% for US investors.

While European and Japanese investors’ allocations to foreign debt securities comprise roughly 30% and 20% of their total fixed income holdings, in the US case it is under 10%. In the case of Japanese and Eurozone investors, allocations specifically to US fixed income comprise roughly 60% of their foreign fixed income holdings and about 15% of their total fixed income portfolios. Among European investors in particular their US allocation has roughly doubled over the last decade. By contrast, in the case of the US investors, allocations to Euro Area fixed income comprise about 25% of their foreign bond holdings but just 1.6% of their total fixed income portfolio. This logically implies that tension in bond markets has more potential to spook international investors when it involves the US market, simply because exposures are so elevated—given domestic investors have traditionally been found to be stickier during periods of turmoil.

Takeaways by Macro Roundup® AI

  1. Foreign debt securities make up roughly 30% of European investors' and 20% of Japanese investors' total fixed income holdings, versus under 10% for US investors.
  2. US fixed income comprises roughly 60% of Japanese and Eurozone investors' foreign fixed income holdings and about 15% of their total fixed income portfolios, with European investors' US allocation roughly doubling over the last decade.
  3. US investors' Euro Area fixed income holdings amount to about 25% of their foreign bond holdings but just 1.6% of their total fixed income portfolio, implying that bond market tension involving the US has more potential to unsettle international investors, since domestic investors have traditionally proven stickier during turmoil.

Related Articles:

  • A Global Rebalancing Is Well Underway as Investors Sell Off U.S. Bonds — Foreign funds pulled an estimated $14.2bn from U.S. Treasuries and corporate bonds over a two-week period, while U.S.-based funds saw $11.4bn of outflows from U.S. fixed income. Analysts note that large institutions such as pension funds and insurers often take many months to implement such portfolio shifts.
  • 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.
  • Dollar Upheaval: This Time is Different — Standard interest-rate parity implies a 50 basis-point rise in U.S. long-term yields relative to European yields should appreciate the dollar about 5%, yet the dollar depreciated 3.6%, leaving an 8.6% gap. The authors argue investors have reduced their willingness to pay for the safety and liquidity of all dollar-denominated assets, not only U.S. Treasury securities.

AI Summary. Overseas holdings of U.S. equities have grown from $3.8tn to $18.6tn, rising from a quarter to a third of U.S. market capitalization, while the foreign-held share of Treasuries has fallen from 44% to a quarter of that market. Net foreign purchases and stock returns show a consistent positive link, making equities more sensitive to foreign flows than bonds.

Jon Sindreu Wall Street Journal
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Historically, net foreign flows influence equity returns more than bond prices. Overseas rotation out of American equities would have a significant impact on returns. The $18.6T of overseas holdings make up 1/3 of US market capitalization.

Are U.S. stocks more vulnerable than bonds to foreign selling?

Core argument: Overseas holdings of U.S. equities rose from $3.8 trillion in December 2011 to $18.6 trillion, climbing from a quarter to a third of U.S. market capitalization, according to official data.

The [U.S.] stock market has arguably grown more dependent on foreign money. Since December 2011, overseas holdings of U.S. equities have grown from $3.8 trillion to $18.6 trillion, official data show, going from a quarter to a third of U.S. market capitalization. The percentage of Treasuries held abroad has, meanwhile, fallen from 44% to a quarter of the market, despite nominally rising 76%. But bonds are less sensitive to actual buying and selling than stocks, for which net foreign purchases and returns show a consistent positive link—despite returns vastly outpacing flows. In February, a forward price-earnings ratio of 22.5 for the S&P 500 was seen as justified. Now that long-run prospects have worsened, this has fallen to 18.7. Both are elevated by historical standards, and may partly be a rationalization of years of indiscriminate buying.

Takeaways by Macro Roundup® AI

  1. Overseas holdings of U.S. equities rose from $3.8 trillion in December 2011 to $18.6 trillion, climbing from a quarter to a third of U.S. market capitalization, according to official data.
  2. Foreign ownership of Treasuries fell from 44% to a quarter of the market even as nominal holdings rose 76%, and bonds are less sensitive to actual buying and selling than stocks.
  3. The S&P 500's forward price-earnings ratio has fallen from 22.5 in February to 18.7 as long-run prospects worsened, with both levels elevated by historical standards.

Related Articles:

  • Bear Market Anatomy – The Path and Shape of the Bear Market — Cyclical and event-driven bear markets have both averaged declines of roughly 30%, but cyclical ones last about two years and take five to recover, versus about eight months and one year for event-driven; structural bear markets average 60% declines over three-plus years and take a decade to recover.
  • 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.
  • 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 author argues the dollar has considerably further to fall, noting Federal Reserve data show its real value nearly two standard deviations above its average since 1973, a level matched only twice before, each followed by depreciations of 25-30%. Financing the $1.1tn US current account deficit requires matching net capital inflows.

Jan Hatzius Financial Times
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The dollar’s value on a broad trade-weighted basis is almost 2SD above its historical mean. Two periods with similar valuations, the mid-1980s and early 2000s, saw depreciation of 25-30%, compared to today’s 5% thus far.

Does the dollar have considerably further to fall?

Core argument: The real trade-weighted dollar stands nearly two standard deviations above its average since the start of the floating exchange rate era in 1973, according to Federal Reserve data, despite a 5% broad depreciation.

I believe that the recent dollar depreciation of 5% on a broad trade-weighted basis has considerably further to go. Federal Reserve data shows that the real value of the dollar still stands nearly two standard deviations above its average since the start of the floating exchange rate era in 1973. The only two historical periods with similar valuation levels were the mid-1980s and the early 2000s. Both set the stage for depreciations of 25-30%. A decision by non-US investors to reduce their US exposure would thus almost certainly result in significant dollar depreciation. In fact, even reluctance by non-US investors to add to their US portfolios will probably weigh on the dollar. This is because balance of payments accounting implies that the US current account deficit of $1.1tn must be financed via a net capital inflow of $1.1tn per year. In theory, this could come via foreign purchases of US portfolio assets, foreign direct investment in the US, or US sales of foreign assets. In practice, however, most swings in the US current account balance correspond to swings in foreign purchases of US portfolio assets. If non-US investors don’t want to buy more US assets at their current prices, those prices must fall, the dollar must weaken, or (most likely) both.

Takeaways by Macro Roundup® AI

  1. The real trade-weighted dollar stands nearly two standard deviations above its average since the start of the floating exchange rate era in 1973, according to Federal Reserve data, despite a 5% broad depreciation.
  2. The only two comparable dollar valuation periods, the mid-1980s and the early 2000s, each set the stage for depreciations of 25–30%.
  3. Balance of payments accounting implies the US current account deficit of $1.1tn must be financed by a net capital inflow of $1.1tn a year, so if non-US investors decline to buy more US assets at current prices, those prices must fall, the dollar must weaken, or both.

Related Articles:

  • What the Weak Dollar Means for the Global Economy — The dollar has weakened to fresh lows against the euro, Japanese yen and Swiss franc, with the ICE U.S. Dollar Index down 8% this year, the worst start to a year in its four-decade history. Some on Wall Street worry China will push the yuan lower to offset trade-war effects.
  • Dollar Upheaval: This Time is Different — Standard interest-rate parity implies a 50 basis-point rise in U.S. long-term yields relative to European yields should appreciate the dollar about 5%, yet the dollar depreciated 3.6%, leaving an 8.6% gap. The authors argue investors have reduced their willingness to pay for the safety and liquidity of all dollar-denominated assets, not only U.S. Treasury securities.
  • Tariffs, the Dollar, and Equities: High-Frequency Evidence from the Liberation Day Announcement — Following a sweeping US tariff announcement, the dollar's effective exchange rate depreciated rather than appreciating as standard international macroeconomic models predict: all G10 currencies gained against the dollar while the most freely floating emerging market currencies gained less or fell. The authors read this as advanced economies rebalancing away from dollar assets.

AI Summary. A dynamic quantitative trade model finds that tariffs raise the price of investment goods relative to labor, depressing capital demand and shrinking the long-run capital stock. The authors estimate US consumption falls 2.6% in the long run when capital adjusts, versus 0.6% when capital is held fixed.

David Baqaee and Hannes Malmberg National Bureau of Economic Research
Date Posted:

Contrary to the common view that the short run burden of trade wars lessens with adjustment over time, taxation of foreign investment goods may mean that U.S. consumption can fall by 2.6%,vs. 0.6% when capital is held fixed, as in a static model.

How much do tariffs reduce long-run consumption when capital adjusts?

Core argument: In a dynamic quantitative trade model where capital adjusts, U.S. long-run consumption falls by 2.6% under the April 2, 2025 tariff schedule with symmetric foreign retaliation, versus 0.6% when capital is held fixed as in a static model.

This note shows that accounting for capital adjustment is critical when analyzing the long-run effects of trade wars on real wages and consumption. The reason is that trade wars increase the relative price between investment goods and labor by taxing imported investment goods and their inputs. This price shift depresses capital demand, shrinks the long-run capital stock, and pushes down consumption and real wages compared to scenarios when capital is fixed. We illustrate this mechanism using a dynamic quantitative trade model.The US imposes tariffs on the rest of the world in line with the tariff schedule presented by the Trump administration April 2, 2025. The rest of the world retaliates by imposing symmetric import tariffs on the United States..When the capital stock is allowed to adjust, long-run consumption and wage responses are both larger and more negative. With capital adjustment, U.S. consumption can fall by 2.6%, compared to 0.6% when capital is held fixed, as in a static model. Capital capital stock adjustment emerges as a dominant driver of long-run outcomes, more important than the standard mechanisms from static trade models — terms-of-trade effects and misallocation of production across countries.

Takeaways by Macro Roundup® AI

  1. In a dynamic quantitative trade model where capital adjusts, U.S. long-run consumption falls by 2.6% under the April 2, 2025 tariff schedule with symmetric foreign retaliation, versus 0.6% when capital is held fixed as in a static model.
  2. The authors attribute the larger losses to trade wars taxing imported investment goods and their inputs, raising the price of investment goods relative to labor, depressing capital demand, and shrinking the long-run capital stock.
  3. Capital stock adjustment emerges in the authors' model as a dominant driver of long-run consumption and real wage outcomes, more important than the terms-of-trade and cross-country production misallocation channels of static trade models.

Related Articles:

  • Trump Shock Pushes US and China Toward Decoupling Cliff Edge — 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.
  • Why Broad-Based Import Tariffs Can Hurt Exports and Manufacturing Jobs — Firms that both export and import account for 84% of US export value and 91% of import value, and employ more than 80% of all US manufacturing workers along with over half of workers in management, utilities, wholesale, transportation, information, and retail. These firms create over three-quarters of net new manufacturing jobs.
  • 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.

AI Summary. The US president argued that a higher tax rate on millionaires would be disruptive because wealthy people would leave the country, citing other countries that have lost high earners after similar moves. The remarks push back on discussions among some Republican lawmakers about a new 40% bracket for those earning $1m or more to help fund an economic package.

Steven Dennis and Hadriana Lowenkron Bloomberg
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In response to a question about GOP proposals for higher taxes on the rich, Trump said, “I think it would be very disruptive because the millionaires would leave the country.”

Would a higher tax rate on millionaires drive wealthy people abroad?

Core argument: President Donald Trump said a higher tax rate on millionaires would be "very disruptive because the millionaires would leave the country," arguing other countries that have done it have lost many of their wealthy people.

President Donald Trump said that imposing a higher tax rate on millionaires would spur the country’s richest to leave the US, downplaying an idea that is under discussion in some Republican circles as a way to pay for an economic package. “I think it would be very disruptive because the millionaires would leave the country,” Trump told reporters in the Oval Office on Wednesday. “Other countries that have done it have lost a lot of people. They lose their wealthy people. That will be bad because the wealthy people pay the tax.” Trump’s remarks are likely to pour cold water on discussions about creating a new 40% tax bracket for people earning $1 million or more. Some members of the party in both the House and Senate have said they’re open to raising levies on top earners to help pay for other pieces of Trump’s agenda, which include proposals to end taxes on tips and overtime.

Takeaways by Macro Roundup® AI

  1. President Donald Trump said a higher tax rate on millionaires would be "very disruptive because the millionaires would leave the country," arguing other countries that have done it have lost many of their wealthy people.
  2. Trump's remarks downplay discussions in some Republican circles about creating a new 40% tax bracket for people earning $1 million or more to help pay for an economic package.
  3. Some House and Senate Republicans have said they are open to raising levies on top earners to pay for other parts of Trump's agenda, including proposals to end taxes on tips and overtime.

Related Articles:

  • Millionaire Tax Hike Gains Steam as Trump Signals Openness — Republicans in the White House, Senate and House are drafting analyses on creating a new top income tax bracket for the wealthiest Americans, with a House proposal setting the rate at 40% for taxpayers earning $1m or more a year.
  • Taxing Top Wealth: Migration Responses and Their Aggregate Economic Implications — Swedish data show that when a wealth-taxed entrepreneur emigrates, employment at their businesses falls 33%, value-added 34%, tax payments 50%, and investment 21%, but 60% of closed firms are absorbed by other domestic companies. The authors estimate aggregate effects on employment and investment are small.
  • Behavioral Responses to State Income Taxation of High Earners: Evidence from California — A California ballot measure raising top marginal income tax rates by up to 3 percentage points prompted an additional 0.8% of the affected tax base to leave the state, with an estimated income elasticity of 2.5–3.2 for high earners who stayed. The authors estimate these responses eroded 45.2% of windfall revenues within one year and 60.9% within two.

AI Summary. Researchers transmitted coherent quantum information 158 miles over existing buried fiber-optic telecommunications cables using ordinary computers, without the cryogenic cooling such systems typically require. A relay detector at a midpoint data center between two German cities enabled the distance, which had previously been achieved only in laboratory settings.

Aylin Woodward Wall Street Journal
Date Posted:

A team at Toshiba Europe sent quantum information over a record-breaking 158 miles, achieving quantum communication – an ultra secure means of transmitting data – using ordinary computers and fiber-optic cables.

Can quantum information travel long distances over existing fiber-optic networks?

Core argument: Toshiba Europe researchers sent quantum information across a record 158 miles using ordinary computers and existing fiber-optic cables, the first coherent quantum communication achieved over existing telecommunications infrastructure without cryogenic cooling, according to a study published in Nature.

Scientists have sent quantum information across a record-breaking 158 miles using ordinary computers and fiber-optic cables. It is the first time coherent quantum communication—an ultrasecure means of transmitting data—has been achieved using existing telecommunications infrastructure, without the expensive cryogenic cooling that is typically required. “Our equipment was running alongside the fibers that we use for regular communication literally buried underneath the roads and train stations,” said Mirko Pittaluga, a physicist and lead author of a study published Wednesday in Nature describing the work. Pittaluga and his colleagues at Toshiba Europe sent quantum information from regular computers hooked into the telecommunications network at data centers in the German cities of Kehl and Frankfurt, relaying them through a detector at a third data center roughly midway between them in Kirchfeld. The three-location setup enabled the group to extend the distance the messages were sent more than 150 miles, an uninterrupted distance only ever achieved in a laboratory environment.

Takeaways by Macro Roundup® AI

  1. Toshiba Europe researchers sent quantum information across a record 158 miles using ordinary computers and existing fiber-optic cables, the first coherent quantum communication achieved over existing telecommunications infrastructure without cryogenic cooling, according to a study published in Nature.
  2. The team relayed quantum messages between data centers in the German cities of Kehl and Frankfurt through a detector at a third data center in Kirchfeld roughly midway, a three-location setup that extended the distance beyond 150 miles.
  3. Lead author Mirko Pittaluga said the equipment ran alongside fibers used for regular communication buried under roads and train stations, a distance previously achieved uninterrupted only in a laboratory environment.

Related Articles:

  • Mini-Satellite Paves the Way for Quantum Messaging Anywhere On Earth — Researchers used a low-cost, lightweight microsatellite to distribute a quantum encryption key nearly 13,000 km between rooftops in Beijing and at Stellenbosch University near Cape Town, encrypting two images. The demonstration is a step toward ultra-secure quantum messaging between any two locations, however distant.
  • Physicists Question Microsoft’s Quantum Claim — Physicists outside the work have responded cautiously to Microsoft's topological quantum computing claim, noting that the search for topological qubits and the "Majorana" particles underpinning them has a history of bold announcements later withdrawn. Researchers describe the technology as excruciatingly difficult to actually build.
  • Microsoft’s Majorana 1 Chip Carves New Path for Quantum Computing — Microsoft unveiled Majorana 1, a quantum chip built on a Topological Core architecture using a new materials stack of indium arsenide and aluminum, which the company expects will enable quantum computers capable of solving industrial-scale problems within years rather than decades. The topological superconductor produces a qubit that is fast, small, stable, and digitally controlled.

Friday, April 25, 2025

AI Summary. Hedge funds running "relative-value" trades borrow heavily in short-term funding markets to exploit small price gaps between Treasury bonds and related derivatives, making them central players in the $29tn Treasury market and helping restrain US government borrowing costs. Many observers fear this leverage also leaves Treasuries vulnerable to sudden shocks.

Robin Wigglesworth, Kate Duguid, Costas Mourselas and Ian Smith Financial Times
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Swaps and the basis trade now hold as much US government debt as the Bank of Japan; demand from hedge funds is an important driver of Treasury’s current clearing level, which may “ make Treasuries vulnerable if foreign investors pull back.”

Does hedge fund leverage lower government borrowing costs while raising shock risk?

Core argument: Hedge funds running "relative-value" trades have become vital pillars of the $29tn US Treasury market, helping restrain the federal government's borrowing costs as interest rates have risen.

“Relative-value” trades usually seek to take advantage of often tiny differences in prices between Treasury bonds and various derivatives contracts linked to them. Using short-term funding markets to borrow extreme amounts of money, they can transform small profits into large ones. These trades have helped turn the club of big hedge funds that pursue them into vital pillars of the $29tn Treasury market, helping restrain the US government’s borrowing costs at a time when interest rates have been rising. Their importance is only likely to climb.. However, many fear that they also make Treasuries vulnerable tf foreign investors pull back from the Treasury market, as many analysts and fund managers po sudden shocks.

Takeaways by Macro Roundup® AI

  1. Hedge funds running "relative-value" trades have become vital pillars of the $29tn US Treasury market, helping restrain the federal government's borrowing costs as interest rates have risen.
  2. Relative-value trades exploit often tiny price differences between Treasury bonds and linked derivatives, borrowing extreme sums in short-term funding markets to turn small profits into large ones.
  3. Many fear that reliance on hedge fund leverage leaves Treasuries vulnerable to sudden shocks, even as the importance of these trades is likely to climb further.

Related Articles:

  • Are Foreigners Selling US Assets? — European and Japanese investors hold roughly 30% and 20% of their fixed income in foreign debt, versus under 10% for US investors, with US bonds making up about 15% of Eurozone and Japanese portfolios. Because foreign investors are less sticky than domestic ones, turmoil in US bond markets has greater potential to unsettle them.
  • A Global Rebalancing Is Well Underway as Investors Sell Off U.S. Bonds — Foreign funds pulled an estimated $14.2bn from U.S. Treasuries and corporate bonds over a two-week period, while U.S.-based funds saw $11.4bn of outflows from U.S. fixed income. Analysts note that large institutions such as pension funds and insurers often take many months to implement such portfolio shifts.
  • 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.

AI Summary. Daily container traffic from China to the US is collapsing, and the author projects empty shelves, Covid-like shortages of consumer goods and Chinese intermediate inputs, and higher inflation in product categories where China is the main supplier to the US market. The author expects significant layoffs in trucking, logistics, and retail, sectors employing 9m and 16m people respectively.

Torsten Sløk Apollo
Date Posted:

Container traffic from China to the US is “collapsing.” Torsten Sløk argues this means consumers will likely start to see empty shelves in US stores “in a few weeks” and “significant” layoffs in trucking in May.

Will collapsing container traffic from China cause shortages, inflation, and layoffs?

Core argument: Daily container traffic from China to the US is collapsing, which the author argues will produce empty US store shelves within weeks and Covid-like shortages for consumers and for firms using Chinese goods as intermediate inputs.

Daily data for container traffic from China to the US is collapsing. The consequence will be empty shelves in US stores in a few weeks and Covid-like shortages for consumers and for firms using Chinese products as intermediate goods. In addition, we will soon begin to see higher inflation because there are a significant number of product categories where China is the main provider of certain goods into the US market. In May, we will begin to see significant layoffs in trucking, logistics, and retail—particularly in small businesses such as your independent toy store, your independent hardware store, and your independent men’s clothing store. With 9 million people working in trucking-related jobs and 16 million people working in the retail sector, the downside risks to the economy are significant.

Takeaways by Macro Roundup® AI

  1. Daily container traffic from China to the US is collapsing, which the author argues will produce empty US store shelves within weeks and Covid-like shortages for consumers and for firms using Chinese goods as intermediate inputs.
  2. The author expects higher inflation because China is the main supplier into the US market across a significant number of product categories.
  3. With 9 million people in trucking-related jobs and 16 million in retail, the author expects significant layoffs in trucking, logistics, and retail, particularly among independent toy, hardware, and men's clothing stores, posing significant downside risks to the economy.

Related Articles:

  • ‘This Mindless Flailing Creates Recessions’: Four Economists Dissect Trump’s Tariffs — Economists argue the tariffs will shrink the US trade deficit by making the country an unattractive destination for capital, since foreign capital inflows require a trade deficit. They warn the policies could mark a break for the dollar comparable to the Suez crisis for the British pound, portending higher borrowing costs, less investment and more stagnation.
  • Probability of VTRR 90% — The author estimates a 90% chance of a US recession triggered by an abrupt shift to very high tariffs, which importers must pay when goods arrive. Small businesses lacking the working capital to cover tariffs face canceled orders and bankruptcies, and account for more than 80% of US employment and capital spending.
  • Bear Market Anatomy – The Path and Shape of the Bear Market — Cyclical and event-driven bear markets have both averaged declines of roughly 30%, but cyclical ones last about two years and take five to recover, versus about eight months and one year for event-driven; structural bear markets average 60% declines over three-plus years and take a decade to recover.

AI Summary. Apple plans to shift assembly of all US-sold iPhones to India, aiming to source the more than 60mn units sold annually in the US from Indian plants, which would require doubling its iPhone output there. The US accounted for about 28% of Apple's 232.1mn global iPhone shipments in 2024.

Michael Acton, Stephen Morris, John Reed and Kathrin Hille Financial Times
Date Posted:

Apple is planning on shifting assembly of all US-sold iPhones, 28% of total production, to India by 2026. This will require a doubling of Indian iPhone output.

Will all US-sold iPhones be assembled in India instead of China?

Core argument: Apple plans to source from India the entirety of the more than 60mn iPhones sold annually in the US by the end of 2026, according to people familiar with the matter.

Apple plans to shift the assembly of all US-sold iPhones to India as soon as next year, according to people familiar with the matter. The push builds on Apple’s strategy to diversify its supply chain but goes further and faster than investors appreciate, with a goal to source from India the entirety of the more than 60mn iPhones sold annually in the US by the end of 2026. The target would mean doubling the iPhone output in India, after almost two decades in which Apple spent heavily in China to create a world-beating production line that powered its rise into a $3tn tech giant. The US accounted for about 28% of Apple’s 232.1mn global iPhone shipments in 2024, according to the International Data Corporation.

Takeaways by Macro Roundup® AI

  1. Apple plans to source from India the entirety of the more than 60mn iPhones sold annually in the US by the end of 2026, according to people familiar with the matter.
  2. Meeting the target would require doubling iPhone output in India, following almost two decades in which Apple spent heavily in China to build a production line that powered its rise into a $3tn company.
  3. The US accounted for about 28% of Apple's 232.1mn global iPhone shipments in 2024, according to the International Data Corporation.

Related Articles:

  • Apple India Produces $22 Billion of iPhones in Shift From China — Apple assembled $22bn of iPhones in India over a 12-month period, up nearly 60% from the prior year, and now makes about one in five of its iPhones there. Most India-made iPhones are assembled at a Foxconn factory in southern India, with Tata Group's electronics arm another key supplier.
  • China and India Decoupling — After decades of moving together, the business cycles of China and India have decoupled.
  • Where Can Investors Find Geographic Diversification Today? — Japan offers investors geographic diversification, with among the lowest correlation in economic conditions to the US of any developed country, reflecting trade exposure split between the US, China, and the broader Asia region. Most sales of Japanese-listed companies are domestic, and investors remain underweight Japanese assets.

AI Summary. Using Danish register data, the authors classify education programs by graduates' starting wages and wage growth and estimate that marital sorting on this "educational ambition" rose about 20% over four decades, while sorting by education level and field stayed flat. Holding ambition-based sorting constant would have cut between-household inequality growth 40%.

Frederik Almar, Benjamin Friedrich, Ana Reynoso, Bastian Schulz, et al. National Bureau of Economic Research
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In Danish data, assortative mating on “ambition types” proxied by the wage paths attached to detailed educational programs rose ~20% over 1980-2018. Sorting on educational ambition rather than level explains >40% of the rise in HH inequality since 1980.

Does marriage sorting by career ambition drive household income inequality?

Core argument: Marital sorting based on "educational ambition" types rose about 20% between 1980 and 2018 in Danish register data, while sorting based on education level and field of study stayed close to its 1980 levels.

Using detailed data from Danish education and labor market registers, we cluster education programs by average starting wages and wage growth of graduates to define four educational ambition types. We show that educational ambition better reflects both wage dynamics and work-life balance measures than categorizations based on educational levels and fields of study. An increase of about 20% in sorting based on the educational ambition categorization between 1980 and 2018. In contrast, sorting based on the level and field of education remains close to its 1980 levels throughout this period. Had the configuration of households based on educational ambition types stayed at their 1980 levels over the last four decades, between-household inequality growth would have been mitigated by approximately 40%. In contrast, changes in marriage market sorting patterns based on education level and field of study contributed less to income inequality growth. Overall, our analysis suggests that considering richer type classifications than the level or field of education can be a promising direction for future research on the relationship between marriage and labor markets.

Takeaways by Macro Roundup® AI

  1. Marital sorting based on "educational ambition" types rose about 20% between 1980 and 2018 in Danish register data, while sorting based on education level and field of study stayed close to its 1980 levels.
  2. The authors estimate that had household configurations by educational ambition type remained at 1980 levels, growth in between-household inequality would have been mitigated by roughly 40%, whereas sorting shifts by education level and field contributed less.
  3. Educational ambition types, defined by clustering education programs on graduates' average starting wages and wage growth, better reflect wage dynamics and work-life balance measures than categorizations based on educational levels and fields of study.

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  • American Women Are Giving Up on Marriage — An analysis of census data by the Aspen Economic Strategy Group finds 51.4% of US women ages 18 to 40 were single—neither married nor cohabitating—up from 41.8% in 2000. Research estimates marriage rates by age 45 for women without a college degree fell from 79% to 52% across those born between 1930 and 1980.
  • Disconnected: The Growing Class Divide in American Civic Life — 17% of Americans report having no close friends, and survey data show a wide educational gap: 24% of those with a high school education or less have no close friends versus 10% of college graduates. Three decades ago, Americans with less formal education reported social circles at least as large.

AI Summary. The collapse of China's property sector, which had contributed roughly a quarter of GDP, has been the most severe constraint on the country's growth, with new property sales down 60%, construction starts down 70%, and prices down a cumulative 16%. The flow of new credit appears sufficient for steady but not strong growth.

Jeffrey Dawson and Hunter Clark Federal Reserve Bank of New York
Date Posted:

Since 2021, Chinese property prices have fallen 16%, and total sales and new starts are down 60% and 70%, respectively – a residue of tight borrowing conditions in 2020. The flow of new credit is now likely sufficient to allow China to “muddle through.”

How much is the property sector collapse constraining China's growth?

Core argument: China's new property sales and construction starts have fallen 60% and 70% respectively, with active construction floor area down 20% and prices down a cumulative 16% despite government price controls, in a sector that contributed roughly one-quarter of GDP.

China’s economy has faced major headwinds since the beginning of 2020. Yet the most severe constraint on growth has been the collapse of the country’s property sector. This crisis had its beginnings in the summer of 2020 when Chinese authorities tightened borrowing requirements on property developers. Financial strains subsequently spread to a large swath of other developers, with attendant spillovers to creditors, suppliers, local governments, and households.The downturn in the property sector—a sector that had contributed roughly one-quarter of GDP—has been severe, as illustrated in the chart below. Total sales and starts of new property construction have fallen by 60% and 70%, respectively, while the total floor area of active construction has fallen by 20%. Property prices, notwithstanding artificial support by government price controls, have fallen by a cumulative 16%. At present, China’s “credit impulse”—the change in the flow of new aggregate credit to the economy relative to GDP—appears likely sufficient to allow it to muddle through with steady but not strong growth over the next year despite the intensifying trade conflict.

Takeaways by Macro Roundup® AI

  1. China's new property sales and construction starts have fallen 60% and 70% respectively, with active construction floor area down 20% and prices down a cumulative 16% despite government price controls, in a sector that contributed roughly one-quarter of GDP.
  2. The collapse of China's property sector has been the most severe constraint on growth since the start of 2020, with the crisis beginning when Chinese authorities tightened borrowing requirements on property developers in the summer of 2020.
  3. Financial strains spread from Chinese property developers to creditors, suppliers, local governments, and households, yet China's credit impulse—the change in the flow of new aggregate credit relative to GDP—appears likely sufficient for steady but not strong growth over the next year despite intensifying trade conflict.

Related Articles:

  • China is Suffering its Own ‘China Shock’ — Academic analysis of 12 labour-intensive Chinese manufacturing industries estimates average employment fell about 14%, or nearly 4mn jobs, between 2011 and 2019, with textile roles down 40%; a further analysis of the same sectors found 3.4mn more jobs lost through 2023. Researchers argue industrial upgrading and automation are cutting demand for lower-skilled workers and depressing their wages.
  • Economist Michael Pettis on China’s Consumption Paradox and the Pitfalls of a Trade War — China's low household consumption share of GDP is not an oversight but is integral to its manufacturing competitiveness, so raising one requires lowering the other. Japan's experience shows consumption share fell for five years after it pledged to raise it, then took 17 years to rise 10 percentage points as manufacturing's share shrank.
  • Peak China Housing — Real estate and related industries account for roughly 29% of China's GDP, a level of dependence the authors estimate exceeds that of Ireland and Spain before their financial crises. A 20% decline in housing activity could reduce economic output by 5-10%.