Edward Conard

Top Ten New York Times Bestselling Author

  • “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 full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “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
  • “…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
  • “…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 is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, May 29, 2025

AI Summary. U.S. survey data show the top 1% held 35% of total wealth, down from a peak of 39% in 2016, a decline the authors attribute to strong housing price appreciation that disproportionately benefited middle-class households. Including the 400 wealthiest Americans, the top 1% share fell from 40.2% in 2016 to 36.9%.

Moritz Kuhn and José-Víctor Ríos-Rull National Bureau of Economic Research
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In the SCF, the wealth share of the top 0.1% of the wealth distribution rose from 10.6% in 1989 to 14.7% in 2022. Adding the Forbes 400 to the sample yields an increase from 12.2% to 17.1%. The Forbes 400 share rose from 1.8% to 2.8%.

Has rising housing wealth reduced the top 1%'s share of wealth?

Core argument: The 2022 Survey of Consumer Finances shows the top 1% holding 35% of total U.S. wealth, down from a 39% peak in 2016, a decline attributed to housing price appreciation that disproportionately benefited middle-class households.

The 2022 [Survey of Consumer Finances] data reveal that wealth remains highly concentrated, with the top 1% holding 35% of total wealth, down from a peak of 39% in 2016. This recent decline in wealth concentration—occurring despite rising income inequality— reflects strong housing price appreciation that disproportionately benefited middle-class households. While the SCF excludes the Forbes 400 (the wealthiest 400 Americans), incorporating their wealth from Forbes Magazine estimates reveals interesting patterns. Their share of total household wealth increased from 1.8% in 1989 to a peak of 3.0% in 2019 before slightly declining to 2.8% in 2022. The top 1% wealth share (including the Forbes 400) followed a similar pattern, rising from 31.2% in 1989 to 40.2% in 2016, before falling to 36.9% in 2022. This recent decline represents a potential inflection point in the long-term trend of rising wealth concentration.

Takeaways by Macro Roundup® AI

  1. The 2022 Survey of Consumer Finances shows the top 1% holding 35% of total U.S. wealth, down from a 39% peak in 2016, a decline attributed to housing price appreciation that disproportionately benefited middle-class households.
  2. Including the Forbes 400, whom the Survey of Consumer Finances excludes, the top 1% wealth share rose from 31.2% in 1989 to 40.2% in 2016 before falling to 36.9% in 2022.
  3. The Forbes 400's share of total U.S. household wealth increased from 1.8% in 1989 to a peak of 3.0% in 2019, then edged down to 2.8% in 2022.

Related Articles:

  • The Gilded Age and Beyond: The Persistence of Elite Wealth in American History — The authors find that most extremely wealthy Americans fall out of the top tail within their lifetimes, and that grandparental wealth is associated with reaching the top 1% in a non-linear way. Still, over 90% of grandchildren of top 1% grandfathers did not reach that level.
  • Inequality Hasn’t Risen. Here’s Why It Feels Like It Has — In both the US and UK, the lowest earners have seen the fastest wage growth and aggregate inequality has not increased, as low-skilled workers gained and middle-skilled workers lost from the hollowing out of the middle of the jobs distribution. The author argues middle earners face both resentment and precarity.
  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.

AI Summary. Inflation-adjusted US house prices are 1.0% below their 2022 peak. An affordability index built from median income, a 15% down payment, and 30-year fixed mortgage rates shows the monthly payment on the same house up 102% over four years, with prices up 34% and mortgage rates at 6.65%.

Bill McBride Calculated Risk
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Real house prices are now 1% below the 2022 peak and 12% above the 2006 peak. With house prices up 34% over four years, affordability remains at levels last seen in the early 1980s when 30-year mortgage rates were over 14%. @calculatedrisk

How much have monthly house payments risen over four years?

Core argument: Inflation-adjusted U.S. house prices stand 1.0% below their 2022 peak, based on the Case-Shiller National Index, seasonally adjusted.

I’ve put together my own affordability index [using] median income from the Census Bureau (estimated 2024 and 2025), assumed a 15% down payment, and used a 2% estimate for property taxes, insurance and maintenance. This is probably low for high property tax states like New Jersey and Texas, and too high for lower property tax states. For house prices, I used the Case-Shiller National Index, Seasonally Adjusted (SA). Also, for the down payment - there wasn’t a significant difference between 15% and 20%. For mortgage rates, I used the Freddie Mac PMMS (30-year fixed rates). So here is what the index looks like (lower is more affordable). The monthly payment for the same house, with house prices up 34% over four years and mortgage rates at 6.65% in March 2025, would be $3,444 - an increase of 102%! More than double for the same house.

Takeaways by Macro Roundup® AI

  1. Inflation-adjusted U.S. house prices stand 1.0% below their 2022 peak, based on the Case-Shiller National Index, seasonally adjusted.
  2. The monthly payment for the same house would rise 102% to $3,444, with house prices up 34% over four years and 30-year fixed mortgage rates at 6.65% in March 2025.
  3. The affordability index uses Census Bureau median income (2024 and 2025 estimated), a 15% down payment, a 2% estimate for property taxes, insurance and maintenance, and Freddie Mac PMMS mortgage rates, with little difference between 15% and 20% down.

Related Articles:

  • The Price of Housing in the United States — Real housing price appreciation in the United States has varied widely across regions, with West Coast cities rising earlier while prices in other regions remained comparable in real terms to decades earlier. The authors find essentially no relationship between real price growth and zoning restrictiveness in the earliest period studied, and progressively steeper gradients in later periods.
  • The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.
  • Fannie and Freddie May Foment Another Crisis — Fannie Mae and Freddie Mac back more than 60% of new mortgages, up from roughly 45% before the 2008 financial crisis, and hold a $7.5tn loan portfolio; including Federal Housing Administration and Veterans Affairs loans, the government backs nearly 85% of the mortgage market. The Federal Reserve owns $2.2tn in mortgage-backed securities.

AI Summary. The US Court of International Trade ruled that the administration wrongly invoked a 1977 law to impose sweeping tariffs on dozens of countries, along with earlier levies on Canada, Mexico and China tied to border security and fentanyl, making them illegal. The administration said it would appeal.

Shawn Donnan, Erik Larson, and Laura Curtis Bloomberg
Date Posted:

The Court of International Trade blocked tariffs imposed on “Liberation Day” under IEEPA authority. Tariffs imposed under other authority, such as Section 301 tariffs on China, remain in place along with levies on auto parts, aluminum, and steel.

Does a court ruling invalidate emergency-law tariffs on dozens of countries?

Core argument: A three-judge panel of the US Court of International Trade ruled that the Trump administration wrongly invoked a 1977 law in imposing its "Liberation Day" tariffs on dozens of countries, declaring them illegal.

In a ruling issued late Wednesday, a three-judge panel for the US Court of International Trade declared that the Trump administration had wrongly invoked a 1977 law in imposing his “Liberation Day” tariffs on dozens of countries and they were therefore illegal. It also extended that ruling to previous tariffs levied on Canada, Mexico and China over the security of the US border and trafficking in fentanyl. The Trump administration immediately said it would appeal, putting the fate of the tariffs in the hands of an appellate court and potentially the Supreme Court. The ruling doesn’t affect Trump’s first-term levies on many imports from China or sectoral duties planned or already imposed on goods including steel, which are based on a different legal foundation that the Trump administration may now be forced to make more use of to pursue its tariff campaign.

Takeaways by Macro Roundup® AI

  1. A three-judge panel of the US Court of International Trade ruled that the Trump administration wrongly invoked a 1977 law in imposing its "Liberation Day" tariffs on dozens of countries, declaring them illegal.
  2. The court extended its ruling to earlier tariffs on Canada, Mexico and China tied to US border security and fentanyl trafficking, while leaving intact first-term levies on many Chinese imports and sectoral duties such as steel that rest on a different legal foundation.
  3. The Trump administration said it would appeal, placing the tariffs' fate with an appellate court and potentially the Supreme Court, and may be forced to make greater use of the separate legal authority behind its sectoral duties.

Related Articles:

  • State of U.S. Tariffs: May 29, 2025 — The authors estimate that if tariffs issued under emergency economic powers are invalidated, leaving only steel, aluminum, auto, and auto parts tariffs, consumers would face an average effective tariff rate of 6.9%, the highest since 1969. They project a 0.6% short-run price increase, equal to an average household loss of $950, and US real GDP growth 0.2pp lower.
  • 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.
  • Why Didn’t Tariffs Push up the U.S. Dollar? — The US dollar was exceptionally strong at a level implying an ever-shrinking export base and an ever-growing trade deficit, requiring continually larger foreign inflows at ever more inflated dollar and US equity valuations to sustain. Even after its recent slide, the dollar remains strong by almost all measures.

AI Summary. The authors estimate that if tariffs issued under emergency economic powers are invalidated, leaving only steel, aluminum, auto, and auto parts tariffs, consumers would face an average effective tariff rate of 6.9%, the highest since 1969. They project a 0.6% short-run price increase, equal to an average household loss of $950, and US real GDP growth 0.2pp lower.

Ernie Tedeschi Yale University
Date Posted:

The May 28 Court Ruling disallowing the tariffs imposed under IEEPA leaves only the Section 232 tariffs on steel, aluminum, autos and auto parts in place. The latter sees a 5% long-run price rise, ~ an extra $2,400 on the cost of an average 2024 new car.

How costly are tariffs if emergency-power tariffs are struck down?

Core argument: Assuming the May 28 U.S. Court of International Trade ruling invalidates all IEEPA tariffs and leaves only Section 232 tariffs on steel, aluminum, autos, and auto parts, consumers face an average effective tariff rate of 6.9%, the highest since 1969.

[We] estimated the effects of all remaining US tariffs and foreign retaliation implemented in 2025 through May 28, assuming all tariffs previously introduced under IEEPA authority are invalidated per the May 28 U.S. Court of International Trade Ruling, which leaves only tariffs introduced under Section 232 authority in place: tariffs on steel and aluminum as well as autos and auto parts. Consumers face an overall average effective tariff rate of 6.9%, the highest since 1969. The price level from all 2025 tariffs rises by 0.6% in the short-run, the equivalent of an average per household consumer loss of $950 in 2024$. Annual pre-substitution losses for households at the bottom of the income distribution are $800. The post-substitution price increase settles at the same 0.6%. The 2025 tariffs affect metals inputs and automobile prices primarily. The latter sees a 5% long-run price increase, the equivalent of an extra $2,400 on the cost of an average 2024 new car. US real GDP growth is -0.2pp lower from all 2025 tariffs. All tariffs to date in 2025 raise $686 billion over 2026-35, with $101 billion in negative dynamic revenue effects.

Takeaways by Macro Roundup® AI

  1. Assuming the May 28 U.S. Court of International Trade ruling invalidates all IEEPA tariffs and leaves only Section 232 tariffs on steel, aluminum, autos, and auto parts, consumers face an average effective tariff rate of 6.9%, the highest since 1969.
  2. The 2025 tariffs are estimated to raise the short-run price level by 0.6%, equivalent to an average household consumer loss of $950 in 2024 dollars, with annual pre-substitution losses of $800 for households at the bottom of the income distribution.
  3. Automobile prices are projected to rise 5% in the long run, an extra $2,400 on an average 2024 new car, while US real GDP growth is 0.2pp lower and 2025 tariffs raise $686 billion over 2026–35, including $101 billion in negative dynamic revenue effects.

Related Articles:

  • Trump Trade Strategy Roiled by Court Blocking Global Tariffs — The US Court of International Trade ruled that the administration wrongly invoked a 1977 law to impose sweeping tariffs on dozens of countries, along with earlier levies on Canada, Mexico and China tied to border security and fentanyl, making them illegal. The administration said it would appeal.
  • State of U.S. Tariffs: May 12, 2025 — The authors estimate that all 2025 US tariffs raise the short-run price level by 1.7%, equal to an average consumer loss of $2,800 per household, cut real GDP growth by 0.7 percentage points, and leave the economy persistently 0.4% smaller, or $110bn annually. They project the tariffs raise $2.7tn over 2026-35, $300bn more than under a 145% China rate.
  • This is What Normalization Looks Like (Mostly) — Estimates of the legislation's cost rest on a baseline assuming individual and business taxes would have been allowed to rise sharply as prior tax cuts expired. The Committee for a Responsible Federal Budget estimates the bill adds $3.1tn in incremental debt over 2026-2035, below its pre-election projections of $4tn and $7.8tn for the competing campaign agendas.

AI Summary. An auction of about $3.5bn of 40-year Japanese government bonds drew a bid-to-cover ratio of 2.2, the weakest demand in 10 months, amid what some traders describe as a "buyers' strike" among Japanese life insurers and other domestic investors.

Leo Lewis Financial Times
Date Posted:

A “closely watched” auction of 40-year Japanese government debt drew weak demand, with a bid-to-cover ratio of only 2.2, amid what some traders are calling a “buyers’ strike,” though yields fell to a three-week low of 3.29%.

Is demand for long-dated Japanese government bonds weakening?

Core argument: Japan's auction of roughly $3.5bn of 40-year government bonds drew a bid-to-cover ratio of 2.2, the lowest since July 2024, amid mounting concerns over the world's third-biggest bond market.

A closely watched auction of 40-year Japanese government debt has drawn the lowest demand in 10 months as concerns mount over the world’s third-biggest bond market. Demand for the government’s offer on Wednesday of about $3.5bn of 40-year notes attracted a bid-to-cover ratio — the number of bids received against securities offered — of 2.2, the lowest level since July 2024 and a reflection of what some traders have called a “buyers’ strike” among Japanese life insurers and other domestic participants. Longer-dated bonds had rallied on Tuesday after reports of the finance ministry surveying prime brokers and investors sparked speculation that the government might reduce its issuance of super-long debt as a measure to calm the market. Yields on the 40-year JGB, which move inversely to prices, fell to a three-week low of 3.29%.

Takeaways by Macro Roundup® AI

  1. Japan's auction of roughly $3.5bn of 40-year government bonds drew a bid-to-cover ratio of 2.2, the lowest since July 2024, amid mounting concerns over the world's third-biggest bond market.
  2. Some traders describe a "buyers' strike" among Japanese life insurers and other domestic participants in super-long government debt.
  3. Yields on the 40-year Japanese government bond fell to a three-week low of 3.29% after reports that the finance ministry surveyed prime brokers and investors sparked speculation it might cut super-long issuance.

Related Articles:

  • Fiscal Space and Rising Yields — The Bank of Japan purchased all of Japan's net new government debt issuance, and more, for over a decade under its bond-buying and yield curve control programs, meaning Japanese yields were set by the central bank rather than by markets. With the central bank no longer absorbing all new issuance, yields may need to rise further to attract private buyers.
  • The Japanese Government Bond Market is in Trouble — Yields on 40-year Japanese government bonds have risen by a full percentage point to nearly 3.7%, which the author attributes to inflation, long-term fiscal concerns, Japanese insurers largely halting purchases of very long-term bonds under new solvency rules, and the Bank of Japan shifting from buyer to net seller while still holding over 50% of the market.
  • The Global Rise in Long-Term Yields — Long-term government bond yields have risen globally, with 30-year yields in the UK and Japan at their highest levels since 2000 and the US increase modest by comparison. Rising Japanese yields reduce the incentive for Japanese households to buy foreign bonds such as US Treasuries, adding upward pressure on US long-term rates.

AI Summary. Denmark's parliament adopted a law raising the retirement age to 70 by 2040, which would be the highest in Europe, applying to everyone born after 1970. Denmark ties its official retirement age to life expectancy and revises it every five years, with increases to 68 and 69 scheduled before 2040.

Laura Gozzi BBC
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Denmark is raising its retirement age to 70, the highest in Europe. The change will impact all persons born after 1970.

Will Denmark raise its retirement age to Europe's highest?

Core argument: Denmark's parliament passed a law raising the retirement age to 70 by 2040, which will give Denmark the highest retirement age in Europe, applying to everyone born after 31 December 1970.

Denmark is set to have the highest retirement age in Europe after its parliament adopted a law raising it to 70 by 2040. Since 2006, Denmark has tied the official retirement age to life expectancy and has revised it every five years. It is currently 67 but will rise to 68 in 2030 and to 69 in 2035. The retirement age at 70 will apply to all people born after 31 December 1970. The new law passed on Thursday with 81 votes for and 21 votes against.

Takeaways by Macro Roundup® AI

  1. Denmark's parliament passed a law raising the retirement age to 70 by 2040, which will give Denmark the highest retirement age in Europe, applying to everyone born after 31 December 1970.
  2. Denmark's retirement age, currently 67, will rise to 68 in 2030 and 69 in 2035 before reaching 70 in 2040.
  3. Denmark has tied its official retirement age to life expectancy since 2006 and revised it every five years, with the latest law passing by 81 votes to 21.

Related Articles:

  • Analysis of the 2024 Social Security Trustees’ Report — The Social Security Trustees project the retirement trust fund will deplete its reserves by 2033, triggering a 21% across-the-board benefit cut, with the combined retirement and disability funds insolvent by 2035 and a 17% cut. Restoring 75-year solvency would require the equivalent of a 27% payroll tax increase or a 21% benefit reduction.
  • China’s First Retirement Age Hike Since 1978 Triggers Discontent — China will raise its retirement age for the first time since 1978, phasing in over 15 years a shift for men from 60 to 63 and for women from 50 to 55 for ordinary workers and 55 to 58 for managers. People 65 and older are projected to reach 30% of the population by around 2035, from 14.2%.
  • Macron’s Pensions Law Clears Constitutional Hurdle After Protests — France's constitutional council validated most of a law raising the minimum retirement age from 62 to 64, ruling it valid under the constitution and legally enacted. Turnout for labour-led marches and strikes against the reform has shrunk.

AI Summary. Of 35m borrowers with federally managed student loans who were not in school, only 12m (35%) were in repayment, while 7.4m were delinquent and another 10m were in forbearance. Because default follows 270 days of nonpayment, the author warns that as many as 12m borrowers—one-third of those not in school—could end up in default.

Preston Cooper American Enterprise Institute
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Only 34% of the 35mm US borrowers with federally managed student loans, and not enrolled in school, were making repayments as of March. “If delinquent borrowers do not start making payments, there could be 12 million borrowers in default by year’s end.”

How many student loan borrowers are heading toward default?

Core argument: Just 12 million of the 35 million borrowers with federally managed loans who were not enrolled in school — 35% — were in repayment as of March 2025, while 7.4 million were delinquent, most at least three months behind.

Though payments “resumed” in October 2023, the lack of consequences for nonpayment may have misled borrowers into thinking the pause had been extended again. Out of 35 million borrowers with federally managed loans who were not enrolled in school, just 12 million (35%) were in repayment as of March 2025. Over one-fifth (7.4 million) were delinquent on their debts, the majority of those being at least three months behind. Another 10 million borrowers are in forbearance. These are largely people who enrolled in the SAVE plan and now await the legal battle’s outcome. While those borrowers are safe from consequences for the time being, eventually the forbearance will end. That brings the danger of a new wave of delinquencies. While millions of borrowers are delinquent today, more serious consequences await. Borrowers enter default after not making a payment for 270 days; since payments effectively resumed in October 2024, today’s delinquent borrowers will enter default sometime over the summer. If delinquent borrowers do not start making payments, there could be 12 million borrowers in default by year’s end—one‑third of all those not currently enrolled in school.

Takeaways by Macro Roundup® AI

  1. Just 12 million of the 35 million borrowers with federally managed loans who were not enrolled in school — 35% — were in repayment as of March 2025, while 7.4 million were delinquent, most at least three months behind.
  2. Another 10 million borrowers are in forbearance, largely those who enrolled in the SAVE plan and await the outcome of the legal battle, raising the danger of a new wave of delinquencies once that forbearance ends.
  3. Borrowers enter default after 270 days of nonpayment, and with payments effectively resumed in October 2024, delinquent borrowers would enter default over the summer, potentially reaching 12 million in default by year's end — one-third of those not enrolled in school.

Related Articles:

  • Significant Headwinds to Consumer Spending — With the pause on reporting delinquent federal student loans ended, up to 10% of US households may face a steep drop in their credit scores, leaving them unable to borrow for cars, homes, or furniture. Together with tariffs and high uncertainty, this is a significant headwind to consumer spending.
  • Debt Moratoria: Evidence from Student Loan Forbearance — The authors estimate that borrowers whose student loan payments were frozen ended with about $1,500 more in student loan balances and $1,200 (3%) more in other household debt, including mortgage, auto, and credit card borrowing, than borrowers without a payment stoppage. The findings suggest the pause raised short-term consumption and overall leverage, with effects concentrated among borrowers never previously delinquent.
  • What Went Wrong with Federal Student Loans? — Weakened regulations on institutions enrolling aid-dependent students led to rising enrollment of disadvantaged students, but primarily at low-value institutions where loan performance deteriorated. Institutions in the lowest loan-repayment quintile had a 23% completion rate, $27,760 average post-enrollment earnings, and 20% default rates, versus 73%, $48,375, and 3% at the highest.

Friday, May 30, 2025

AI Summary. A proposed US tax provision, Section 899, would raise tax rates on individuals and companies from countries whose tax policies the US deems discriminatory, including those imposing digital services taxes on large technology firms. Analysts say the measure, which could raise rates on passive income such as interest and dividends, would further drive away foreign investors.

Ye Xie and Liz Capo McCormick Bloomberg
Date Posted:

A provision in the reconciliation bill to counter digital services taxation of US firms and the global minimum tax, would give Treasury the authority to tax foreign holders of US assets, and could ultimately reduce demand for US securities.

Would retaliatory taxes on foreign investors drive them away from US assets?

Core argument: Section 899, "Enforcement of Remedies Against Unfair Foreign Taxes," would raise tax rates on individuals and companies from countries whose tax policies the US deems "discriminatory," including Canada, the UK, France and Australia over their digital services taxes on large technology companies.

Section 899, “Enforcement of Remedies Against Unfair Foreign Taxes” — calls for, among other things, increasing tax rates for individuals and companies from countries whose tax policies the US deems “discriminatory.” Section 899 takes aim at countries including Canada, the UK, France and Australia that impose “digital services taxes” on large technology companies such as Meta. The clause also targets countries using provisions in a multi-country deal for minimum corporate taxes. [899 would allow the US to] raise tax rates on passive income, such as interest and dividends, earned by investors who are potentially sitting on trillions in American assets. Cloaked in technicalities, the implication of the “revenge” measure, as it’s quickly becoming known, is clear to analysts: If signed into law, it would further drive away foreign investors. The intent of the measure appears similar in spirit to some ideas put forth in November by Stephen Miran chairman of the White House Council of Economic Advisers while he was still working at hedge fund Hudson Bay Capital. Miran raised the possibility of imposing “user fees” on foreign investors in Treasuries as one option to help push down the dollar and address global trade imbalances.

Takeaways by Macro Roundup® AI

  1. Section 899, "Enforcement of Remedies Against Unfair Foreign Taxes," would raise tax rates on individuals and companies from countries whose tax policies the US deems "discriminatory," including Canada, the UK, France and Australia over their digital services taxes on large technology companies.
  2. Section 899 would let the US raise tax rates on passive income such as interest and dividends earned by foreign investors potentially holding trillions in American assets, which analysts say would further drive away foreign investors.
  3. The measure's intent appears similar in spirit to ideas put forth in November by Stephen Miran, chairman of the White House Council of Economic Advisers, who raised the possibility of "user fees" on foreign investors in Treasuries to help push down the dollar and address global trade imbalances.

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.
  • 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.
  • A User’s Guide to Restructuring the Global Trading System — During the 2018–2019 U.S.–China trade war, the effective tariff rate on Chinese imports rose 17.9 percentage points while the renminbi depreciated 13.7% against the dollar, leaving after-tariff import prices in dollars up just 4.1%. The author argues this currency offset of more than three-fourths of the tariff explains why inflation pressure was negligible.

AI Summary. The cost of insuring US government debt against default is trading at about the same level as for Italy and Greece, which carry BBB+ credit ratings. That market pricing is out of line with the higher Aa1/AA+ ratings assigned to US debt.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk notes the US sovereign CDS spread is at ~ the same level of Italy and Greece, which have BBB+ ratings. The Aa1/AA+ ratings currently given to US debt are thus out of line with the market.

Does the market price US default risk below its credit rating?

Core argument: The US sovereign credit default swap spread is trading at roughly the same level as Italy and Greece, both rated BBB+, according to Torsten Sløk.

The US sovereign CDS spread is currently trading at levels similar to countries that are rated BBB+, such as Italy and Greece.

Takeaways by Macro Roundup® AI

  1. The US sovereign credit default swap spread is trading at roughly the same level as Italy and Greece, both rated BBB+, according to Torsten Sløk.
  2. Torsten Sløk argues the Aa1/AA+ ratings assigned to US debt are out of line with market pricing.

Related Articles:

  • US Fiscal Sustainability Once More — US federal interest payments were projected to rise from 18% of tax revenues to about 22% by 2034 under the Congressional Budget Office's prior baseline. The author estimates that if the yield curve stays at current levels and policy is unchanged, that ratio would exceed 25% by 2032 and approach 30% by 2035.
  • 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.
  • ‘People Were Getting a Little Yippy’. Or, How Much Trust the US Lost Because of Trumps’ Policies — The cost of insuring against a US government default has surged while the cost for France, Germany, and Italy has remained broadly stable, leaving US debt twice as expensive to insure as Italian debt. Italy is the more indebted country, with public debt around 135% of GDP versus 121% for the US.

AI Summary. The International Monetary Fund projects Saudi Arabia's budget deficit will widen above 4% of GDP, estimating the oil price needed to balance its books at $92 a barrel, with debt at 26% of GDP against a 40% ceiling. Saudi officials plan to maintain spending while reassessing management of development projects.

Andrew England and Ahmed Al Omran Financial Times
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Since 2022, Saudi Arabia’s budget has switched from surplus to a deficit, now 4% of GDP, which would require a $92bbl oil price – ~50% above its current level – to eliminate without fiscal reforms. Debt/GDP is 26%, well below KSA’s 40% ceiling.

How is Saudi Arabia responding to lower oil prices and widening deficits?

Core argument: The IMF forecasts Saudi Arabia's budget deficit will widen above 4% of GDP this year and next, and estimates Riyadh's break-even oil price at $92 a barrel.

The IMF forecasts the budget deficit will widen above 4% of GDP this year and next, estimating Riyadh’s break-even oil price — the level it needs to balance its books — to be $92 a barrel. Its debt-to-GDP ratio is relatively low at 26%, and Saudi Arabia’s finance minister Mohammed al-Jadaan said he did not see “any reasonable scenario” that “would make us even come close to” the ministry’s ceiling of 40%. Mohammed al-Jadaan told the Financial Times that Riyadh planned to maintain its current pace of government spending — despite widening budget and current account deficits, and rising debt — as it seeks to support ambitious development plans. But he said Saudi Arabia would use the period of lower oil prices, as well as the uncertain global outlook, to evaluate how it managed the vast array of development projects under Crown Prince Mohammed bin Salman’s $1tn plans to diversify the economy and boost non-oil growth.

Takeaways by Macro Roundup® AI

  1. The IMF forecasts Saudi Arabia's budget deficit will widen above 4% of GDP this year and next, and estimates Riyadh's break-even oil price at $92 a barrel.
  2. Saudi finance minister Mohammed al-Jadaan told the Financial Times that Riyadh would maintain its current pace of government spending despite widening budget and current account deficits and rising debt, to support development plans.
  3. Saudi Arabia's debt-to-GDP ratio stands at 26% against the finance ministry's 40% ceiling, and Mohammed al-Jadaan said he saw no "reasonable scenario" that would make the kingdom "even come close to" that level.

Related Articles:

  • A Spendthrift Saudi Arabia Can’t Finance the World Anymore — Saudi Arabia has become a net consumer of foreign capital rather than a provider, accumulating $142bn in foreign debt as heavy spending on economic transformation outpaces oil revenue, with its sovereign wealth fund scaling back some projects. Estimates put the oil price needed to balance its budget near $96 a barrel.
  • AI Arrives In The Middle East: US Strikes A Deal with UAE and KSA — U.S. artificial intelligence agreements with the United Arab Emirates and Saudi Arabia bypass prior export-control rules, unlocking large-scale Gulf capital for AI infrastructure both in the region and in the United States. The author argues the deals tie both states more closely to American technology and position the energy-rich Gulf as a major AI hub.
  • The Petrodollar Is Dead, Long Live the Petrodollar — Saudi Arabia has no surplus left to recycle and is instead borrowing heavily in sovereign debt markets and selling assets, including stakes in its national oil company, to fund its economic plans. The International Monetary Fund projects the Saudi current account surplus narrowing to 0.5% of GDP before shifting into deficit through the end of the decade.

AI Summary. About half of cars bought in the US are foreign-assembled and directly exposed to auto tariffs, and no popular model exceeds 70% American content once the value of imported parts is counted, with the best-selling Ford F-150 under one-third American. Auto tariffs may prove durable: a 25% tariff on imported trucks has remained in effect for 60 years.

Joseph Politano Apricitas Economics
Date Posted:

There is no such thing as an “all-American” car, as the import content often exceeds 70%. Citing the 25% “chicken tax” on truck imports imposed in 1964, Joseph Politano speculates that car tariffs may prove “more durable than most of Trump’s tariffs.”

How exposed are American car buyers to auto tariffs?

Core argument: Roughly half of cars bought in America are foreign-assembled and directly exposed to Trump's tariffs, while even US-assembled vehicles cannot fully avoid the impact because of embedded foreign parts.

Roughly half of the cars bought in America are foreign-assembled vehicles that will be directly affected by the tariffs, and it’ll be impossible for even US-made vehicles to completely avoid being impacted. That’s purely because there is no such thing as an “all-American” car—among the most popular models last year, none is more than 70% American when you account for the embedded value of foreign parts, and most contain even more imported components than that. Best-selling iconic vehicles like the Ford F-150 are less than a third American. Even this data overstates it—the American and Canadian car industries are so tightly intertwined that the US government doesn’t even try to parse their contributions apart. These car tariffs may prove more durable than most of Trump’s tariffs—the 25% “chicken tax” on imported trucks from 1964 still remains in effect 60 years later, continually limiting Americans’ ability to buy European and Japanese trucks for decades.

Takeaways by Macro Roundup® AI

  1. Roughly half of cars bought in America are foreign-assembled and directly exposed to Trump's tariffs, while even US-assembled vehicles cannot fully avoid the impact because of embedded foreign parts.
  2. None of the most popular US models last year was more than 70% American once the embedded value of foreign parts is counted, and the Ford F-150 is less than a third American.
  3. The 25% "chicken tax" on imported trucks, enacted in 1964 and still in effect 60 years later, suggests Trump's car tariffs may prove more durable than most of his other tariffs.

Related Articles:

  • Will China Take Over the Global Auto Industry? — The global auto market has historically been regional, with most cars sold in a region also built there. Overcapacity in China's internal combustion sector, expanding electric-vehicle capacity, ample state bank credit, and a weaker yuan could concentrate global auto production in China absent restrictions such as the US 100% tariff on Chinese electric vehicles.
  • 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.