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


Monday, July 28, 2025

AI Summary. The Budget Lab estimates that 2025 U.S. tariffs, if left in place, would raise $2.7tn over 2026-35 under conventional scoring. Accounting for the tariffs' negative effects on output, the estimate includes an additional $456bn revenue loss, bringing projected dynamic revenue to $2.3tn over the decade.

Ernie Tedeschi Yale University
Date Posted:

As of July 28, the US has an effective tariff rate of 17.3% including the new 15% rate for the EU. Dynamically scored, Ernie Tedeschi estimates this regime will raise $2.3T over 2026–2035.

How much revenue would the new tariffs raise over a decade?

Core argument: The Budget Lab estimates that the 2025 U.S. tariffs, if left in place, would raise $2.7 trillion over 2026–35 on a conventional score, or $2.6 trillion over 2025–34.

The 2025 tariffs to date, were they to remain in place, would raise $2.7 trillion over 2026-35 conventionally-scored ($2.6 trillion over 2025-34). Given the negative output effects of the tariffs, there would be additional dynamic reductions in tax revenue as a result. Based on Congressional Budget Office rules-of-thumb, The Budget Lab estimates that these effects would total -$456 billion over the decade (-$415 billion over 2025-34), bringing total dynamic revenue to $2.3 trillion over 2026-35 ($2.2 trillion over 2025-34).

Takeaways by Macro Roundup® AI

  1. The Budget Lab estimates that the 2025 U.S. tariffs, if left in place, would raise $2.7 trillion over 2026–35 on a conventional score, or $2.6 trillion over 2025–34.
  2. Accounting for the tariffs' negative output effects, The Budget Lab estimates additional revenue reductions of $456 billion over 2026–35 ($415 billion over 2025–34), based on Congressional Budget Office rules-of-thumb.
  3. Total dynamic revenue from the 2025 tariffs would come to $2.3 trillion over 2026–35 ($2.2 trillion over 2025–34), according to The Budget Lab.

Related Articles:

  • Skyrocketing Tariffs: Why Did Inflation Take So Long to React? — US inflation stayed stable for months after tariff rates rose steeply, which the author attributes to firms stockpiling imports ahead of the tariffs, importers absorbing some added cost through lower profits, and easing inflationary pressures elsewhere. The author argues the first two factors will fade as inventories deplete, pushing consumer prices higher.
  • The Tariff Inflation Shock Starts To Hit — Monthly core goods inflation — a category making up about 25% of the core consumer price index basket — ran roughly 80 basis points above its typical seasonal level, which the author attributes to tariffs. The author argues this effect will keep building as pre-tariff inventories are depleted and transshipments are curbed.
  • We Warned About the First China Shock. The Next One Will Be Worse. — The authors argue China is moving from follower to leader by aggressively contesting innovative sectors long dominated by the United States, including aviation, artificial intelligence, telecommunications, microprocessors, robotics, and nuclear and fusion power. They note the world's largest and most innovative makers of electric vehicles, EV batteries, drones, and solar wafers are all Chinese firms under 30 years old.

AI Summary. New tariffs would add roughly 1% of GDP to a federal tax burden that was 17% of GDP, an amount that aggregate corporate profits near $4tn and disposable personal income around $22tn could absorb at the cost of modestly slower activity. The burden would fall unevenly, concentrated in import-dependent sectors such as autos and clothing.

Joseph Wang Fed Guy Blog
Date Posted:

The conclusion of the trade war amounts to an effective tax hike worth about 1% of GDP, yielding annual revenue between $450B and $600B, Wang suggests. The tariffs will have uneven short-term economic impacts, with autos and clothing bearing the brunt.

Can the economy absorb tariffs that add 1% of GDP in taxes?

Core argument: A very rough estimate puts annual tariff revenue at full implementation between $450bn and $600bn, marginally increasing the tax burden by about 1% of GDP against federal tax revenue of 17% of GDP in 2024.

The tariffs appear small compared to consumer income and corporate profits, but the uneven distribution of the burden will magnify its economic impact. Corporate profits approach $4t with margins at historically high levels, and disposable personal income is around $22T with household wealth at all time highs. On paper, the extra tax could be easily absorbed at the cost of modestly slower economic activity. Federal tax revenue was 17% of GDP in 2024 and the new tariffs would marginally increase the tax burden by about 1% of GDP. However, the aggregate numbers may be misleading as the burden will fall particularly hard on a narrow set of sectors. Research suggests that the auto and clothing sector are particularly dependent on imported goods and would bear the brunt of tariffs. A very rough estimate suggests annual tariff revenue upon full implementation could be between $450b and $600b.

Takeaways by Macro Roundup® AI

  1. A very rough estimate puts annual tariff revenue at full implementation between $450bn and $600bn, marginally increasing the tax burden by about 1% of GDP against federal tax revenue of 17% of GDP in 2024.
  2. With corporate profits approaching $4tn at historically high margins and disposable personal income around $22tn alongside record household wealth, the tariffs could on paper be absorbed at the cost of modestly slower economic activity.
  3. The uneven distribution of the tariff burden will magnify its economic impact, and research suggests the auto and clothing sectors, being particularly dependent on imported goods, would bear the brunt.

Related Articles:

  • The US Trade Deficit and Foreign Borrowing — The authors argue US trade deficits persist because foreign investors find US financial assets attractive, but the current deficit level is not sustainable. They estimate that stabilizing the US net foreign liability position requires improving the trade balance by about 2% of GDP, or over 3% if low-cost borrowing privileges are lost.
  • Are Businesses Absorbing the Tariffs or Passing Them on to Their Customers? — About three-quarters of manufacturing and service firms facing tariff-driven cost increases reported passing at least some of those costs to customers through higher prices, while roughly a quarter of each said they absorbed the full increase without raising prices. Nearly a third of manufacturers and about 45% of service firms reported full pass-through.
  • 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 International Monetary Fund's model implies a "normal" current account surplus for China just under 1% of GDP, while acknowledging that China's goods trade and investment income data look odd relative to customs figures, foreign asset data, and peer countries. Correcting these errors suggests official figures understate China's surplus by roughly $450bn a year.

Matt Klein The Overshoot
Date Posted:

A new IMF report “finally acknowledges” that China’s goods trade balance and its investment income balance are far too low relative to customs data and data on foreign assets and liabilities. China’s deficit is likely > $1T, 2x its official estimate.

Do official data understate China's current account surplus?

Core argument: The author estimates that errors in China's goods trade balance and investment income balance cause official balance of payments data to understate China's current account surplus by about $450 billion a year, putting the 2024 surplus near 4.4% of GDP versus the official 2.3%.

The specific coverage of China in the report has a lot of good points. The IMF’s model implies a “normal” surplus for China just under 1% of GDP, which is lower than the official number for 2024 (2.3%) and not obviously too high. Moreover, the IMF’s latest report finally acknowledges issues with the Chinese data, highlighting—as I and others have for years—that both China’s goods trade balance and its investment income balance look extremely odd relative to China’s customs data, relative to China’s data on foreign assets and liabilities, and relative to peer countries. Correcting for these two sources of error implies that China’s official balance of payments figures likely understate the country’s current account surplus by about $450 billion/year. My estimate is that China’s actual surplus was closer to 4.4% of GDP in 2024. This more plausible estimate of China’s surplus would, by itself, lift the IMF’s estimate of aggregate imbalances by about one-third. China’s current account surplus has likely increased sharply since the end of 2024 based on the monthly customs data. The imbalances described in this report have already gotten worse.

Takeaways by Macro Roundup® AI

  1. The author estimates that errors in China's goods trade balance and investment income balance cause official balance of payments data to understate China's current account surplus by about $450 billion a year, putting the 2024 surplus near 4.4% of GDP versus the official 2.3%.
  2. The IMF's model implies a "normal" surplus for China just under 1% of GDP, and the author's more plausible surplus estimate would by itself lift the IMF's estimate of aggregate imbalances by about one-third.
  3. The IMF's report acknowledges that China's goods trade and investment income balances look odd relative to China's customs data, its data on foreign assets and liabilities, and peer countries.

Related Articles:

  • Global Imbalances In A Shifting World — Current accounts of major economies diverged, with the US deficit widening by $228bn to $1.13tn (1% of world GDP) while China's surplus rose by $161bn to $424bn and the euro area's by $198bn to $461bn. Changes in investment rates drove the widening saving-investment gaps, with private saving offsetting only 10–50% of the investment change.
  • Better Late Than Never: The IMF Starts to Recognize Balance of Payments Reality — The International Monetary Fund's latest report recognizes that global current account imbalances began widening, but its forecast that the surpluses of China, Japan, and Korea will fall is questioned. China's customs goods surplus rose $150bn in the first half of the year, pointing to a current account surplus above $600bn versus the Fund's $365bn projection.
  • Why Global Imbalances Do Matter — From 2008 to 2023 the US household and corporate sectors ran average savings surpluses of 3.5% and 1.6% of GDP respectively, leaving the federal government as the dominant net borrower in the US economy. This suggests the benefit of persistent net capital inflows is the ability to run larger fiscal deficits and grow public debt.

AI Summary. The authors estimate solar panel costs fall about 20% each time cumulative output doubles, creating a feedback loop in which lower costs raise demand and supply and lower costs further. They find panel investment costs have fallen faster than for any other investment good in modern history, including computers and communication equipment.

Daan Struyven, Eoin Dinsmore, Ephraim Sutherland, Samantha Dart, et al. Goldman Sachs
Date Posted:

A GS analysis argues the solar boom, driven by scale economies and the zero marginal cost of fuel, will persist despite falling subsidies. Prospects for additional growth hinge on price guarantees, cheap storage, and grid upgrades.

How fast do solar panel costs fall as output doubles?

Core argument: Solar panel costs are estimated to fall about 20% each time cumulative output doubles, with a positive feedback loop running from lower costs to higher demand, higher supply, and again lower costs.

Learning-by-doing has sharply reduced the cost of solar panels. Specifically, we estimate that costs tend to drop 20% if cumulative output doubles, with a positive feedback loop from lower costs to higher demand, higher supply, and again lower costs. The investment costs have fallen faster for panels than for any other investment good in modern history, including computers and communication equipment. Solar's marginal fuel costs are zero. Solar panels are modular as they come in small sizes available at constant fixed prices, making it easier to create a decentralized grid. In contrast, thermal or nuclear power stations are usually large with high fixed costs.

Takeaways by Macro Roundup® AI

  1. Solar panel costs are estimated to fall about 20% each time cumulative output doubles, with a positive feedback loop running from lower costs to higher demand, higher supply, and again lower costs.
  2. Investment costs for solar panels have fallen faster than for any other investment good in modern history, including computers and communication equipment, and solar's marginal fuel costs are zero.
  3. Solar panels are modular, coming in small sizes at constant fixed prices, which makes a decentralized grid easier to create, in contrast to thermal or nuclear power stations that are usually large with high fixed costs.

Related Articles:

  • Electricity 2025 — US electricity demand is projected to grow about 2% annually over 2025-2027, an upward revision from an earlier 1% forecast. A study commissioned by the US Department of Energy found data centre electricity use rose from about 60 TWh in 2014 to 176 TWh in 2023, and could reach 325-580 TWh by 2028.
  • Green Electricity Costs a Bundle — International Energy Agency data covering nearly 70 countries show a correlation between higher shares of solar and wind and higher average household and industry electricity prices, with costs about 12 cents a kilowatt-hour where solar and wind are minimal and rising more than 5 cents for each 10% increase in their share.
  • 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.

AI Summary. A Wall Street Journal analysis found insurers rated by Demotech were 30x as likely to become insolvent as those graded by its main rivals, with 17 failed home insurers leaving at least $1.7bn in unpaid claims. Demotech-rated insurers collect about half of all Florida home-insurance premiums.

Jean Eaglesham, Susan Pulliam and Caitlin Ostroff Wall Street Journal
Date Posted:

A WSJ analysis found insurers rated by Demotech were 30x as likely to become insolvent as those graded by its main rivals. Demotech-rated insurers collect ~50% of all home-related premia paid in Florida.

Are hurricane-state home insurers backed by unreliable financial strength ratings?

Core argument: Insurers rated by Demotech were 30 times as likely to become insolvent as those graded by its main rivals, according to a Wall Street Journal analysis of failures since 2017.

Florida’s Citizens Property Insurance, created by the Florida legislature in 2002 for homeowners who can’t get coverage elsewhere, has been able to move more than 200,000 policies this year from its books to 10 small insurers with A ratings from Demotech. Insurers Demotech rated were 30 times as likely to become insolvent as those graded by its main rivals, according to a Wall Street Journal analysis of failures since 2017. Insurers rated by Demotech collect about half of all home-insurance premiums paid in Florida, one-third in Louisiana and close to one-quarter in Rhode Island, South Carolina and Texas, the firm’s data show. Overall, one in 10 insurers nationwide that Demotech rated A as of Dec. 31, 2014, defaulted—meaning they were put into liquidation or had other solvency-related actions taken by regulators—by the end of last year, according to recent securities filings. Since 2017—the first year for which Demotech publishes historic ratings online—17 home insurers it rated have gone under, leaving behind at least $1.7 billion in unpaid claims, the analysis showed. Each had received a grade of A within a year of its collapse.

Takeaways by Macro Roundup® AI

  1. Insurers rated by Demotech were 30 times as likely to become insolvent as those graded by its main rivals, according to a Wall Street Journal analysis of failures since 2017.
  2. Since 2017, 17 home insurers rated by Demotech have gone under, leaving at least $1.7 billion in unpaid claims, and each had received a grade of A within a year of its collapse, the Wall Street Journal analysis showed.
  3. Florida's Citizens Property Insurance has moved more than 200,000 policies off its books this year to 10 small insurers carrying A ratings from Demotech, whose rated insurers collect about half of all home-insurance premiums paid in Florida.

Related Articles:

  • Insurance: Climbing Costs Cut Into Consumer Budgets — Bank of America internal data show median household property insurance payments (auto and home) rose 6% year-over-year and more than 40% over five years, lifting such payments to 5% of income. Younger generations saw the largest increases, though Gen X payments also rose 45%.
  • The World Is Getting Riskier. Americans Don’t Want to Pay for It — Americans' resistance to paying to insure against risks from illness, old age, and natural and financial disasters is growing alongside those risks; JPMorgan estimated wildfires around Los Angeles caused $50bn in losses, of which only $20bn were insured. Socializing risk removes the price signal that encourages the insured to mitigate their own exposure.
  • Catastrophe Bond Sales Hit Record as Insurers Offload Climate Risks — Insurers are issuing catastrophe bonds, which transfer risk from events such as wildfires, hurricanes and earthquakes to bondholders, at a record pace, with issuance reaching $18.1bn against a prior full-year record of $17.7bn. A Swiss Re index of total returns on these bonds has risen 14% over the past year.

AI Summary. The US Bureau of Industry and Security, which administers export controls, has been instructed to avoid tough measures against China, according to current and former US officials. Officials cite the risk that China retaliates by restricting exports of critical rare earths and magnets to the US, as it has previously done.

Demetri Sevastopulo Financial Times
Date Posted:

The US is freezing new export controls on China as trade negotiations continue. The US may allow exports of Nvidia’s H20 after direct lobbying from Nvidia’s CEO though no exports have been approved formally.

Does China's rare earth leverage constrain US export controls?

Core argument: The Commerce Department's Bureau of Industry and Security has been told to avoid tough export-control moves on China, according to eight people including current and former US officials, as Trump seeks to avoid actions that could hurt efforts to meet Xi Jinping.

The commerce department’s Bureau of Industry and Security, which runs export controls, has been told in recent months to avoid tough moves on China, according to eight people, including current and former US officials. Trump wants to avoid actions that could hurt efforts to meet Xi, some officials have argued that the US is hamstrung on export controls because of the risk that China retaliates by restricting the export to the US of critical rare earths and magnets, as it did in May for the first time. Earlier this year, Trump was poised to restrict technology exports to China. In April, his team told Nvidia it would block the export of its H20 chip, which was designed for the Chinese market after the Biden administration restricted more advanced chips. But Trump reversed course following direct lobbying from Nvidia chief executive Jensen Huang. The H20 has become the focus of a battle between security officials, who say the chip will help the Chinese military, and Nvidia, which says blocking US technology exports forces Chinese groups to accelerate innovation.

Takeaways by Macro Roundup® AI

  1. The Commerce Department's Bureau of Industry and Security has been told to avoid tough export-control moves on China, according to eight people including current and former US officials, as Trump seeks to avoid actions that could hurt efforts to meet Xi Jinping.
  2. Some US officials argue the United States is hamstrung on export controls because China could retaliate by restricting exports of critical rare earths and magnets to the US, as it did for the first time in May.
  3. Trump's team told Nvidia in April it would block exports of the H20 chip, designed for the Chinese market after Biden administration restrictions on more advanced chips, but Trump reversed course after direct lobbying from chief executive Jensen Huang.

Related Articles:

  • The Year-End Wake-Up: The ‘Chinese Sputnik’ That Demands Our Attention — Chinese AI company DeepSeek trained its Version 3 large language model for roughly $5.6m, about 100x cheaper than Meta's Llama 3, with performance comparable to Claude 3.5 Sonnet and interface access costing 12x less than Anthropic's. The author argues US chip export controls backfired by spurring leaner engineering, and that the gap between open-source and closed-source models is narrowing rapidly.
  • 2025 AI Diffusion Export Controls – Microsoft Regulatory Capture, Oracle Tears, Impacts Quantified, Model Restrictions — The US Framework for Artificial Intelligence Diffusion imposes export restrictions aimed at preventing China from accessing the computing power needed to build frontier AI models. It sorts the world into three tiers — the US and 18 allies, 23 arms-embargoed nations plus Macau, and all other countries — with differing access to AI chips and caps on graphics processor purchases.
  • Chinese Companies Resort To Repurposing Nvidia Gaming Chips For AI — Chinese firms are developing artificial intelligence tools using processors stripped from Nvidia consumer gaming graphics cards and remounted on new circuit boards, after US export controls blocked sales of high-performance chips. Industry experts describe the practice as a rough workaround for China's shortage of high-end processors.

Tuesday, July 29, 2025

AI Summary. A universal 15% tariff on imported goods could raise roughly $300–$400bn annually, a fraction of what a value-added tax would generate but real revenue given U.S. imports of about $4tn. The author argues tariffs are a poorly designed form of consumption tax that could build political groundwork for replacing them with a more efficient value-added tax.

Paul Kedrosky Applied Complexity
Date Posted:

Paul Kedrosky argues the tariff regime is similar to a backdoor VAT and is not “so bad, if the alternative real distortion is structural deficits.” He notes a VAT at half the mean OECD level would “nearly zero out” the current U.S. deficit.

Can tariffs serve as a stepping stone toward a value-added tax?

Core argument: A uniform 15% tariff applied to manufactured goods, roughly 80% of the approximately $4 trillion in annual U.S. imports, might yield about $300–$400 billion a year, a fraction of what an actual VAT would raise.

A VAT set at even half of OECD average levels would nearly zero out the U.S. deficit. Tariffs are a species of VAT, albeit a poorly designed one. A universal tariff on imported goods—say, at 15%—would raise VAT-lite revenues. Based on recent data, U.S. annual imports are around $4 trillion. Applying a uniform 15% tariff to manufactured goods, which is 80-ish% of that might yield roughly $300-$400 billion annually. While this is a fraction of the revenue of an actual VAT, it is real money. The choice then is not between a perfect VAT and an imperfect tariff, but between an imperfect tariff and continued reliance on deficit financing or distortionary taxes on labor and capital income. Tariffs could lay the groundwork politically and psychologically for a future transition to an actual VAT. Citizens and businesses might recognize that consumption taxation you can see is better than consumption taxation that you can't. A future administration could leverage dissatisfaction with tariffs to propose replacing them with a more economically efficient and lower-rate VAT. Politically, the VAT would then become not a "new" tax but rather a tax cut (in rate terms only) eliminating import tariffs.

Takeaways by Macro Roundup® AI

  1. A uniform 15% tariff applied to manufactured goods, roughly 80% of the approximately $4 trillion in annual U.S. imports, might yield about $300–$400 billion a year, a fraction of what an actual VAT would raise.
  2. A U.S. VAT set at even half the OECD average rate would nearly eliminate the federal deficit, and tariffs amount to a poorly designed species of VAT.
  3. The real choice lies between an imperfect tariff and continued deficit financing or distortionary taxes on labor and capital income, with tariffs potentially laying political groundwork for a later switch to a VAT presented as a rate cut.

Related Articles:

  • The Fiscal Future — US debt is on an upward trajectory, and the author argues that extraordinary growth, default, money creation, and spending cuts are each implausible or unacceptable, leaving large tax increases. US governments collect about 28% of GDP in taxes versus 35% in the UK and 46% in France, and a value-added tax could close the roughly 4%-of-GDP fiscal gap.
  • Rapidly Growing Treasury Supply Crowding Out Other Types of Credit Growth — Roughly half of all fixed income issuance coming to market over the past year has been US Treasuries, meaning investors must allocate a growing share of dollars to financing the government. The argument is that lower government debt would free up more funds for consumer borrowing and business investment.
  • State of U.S. Tariffs: July 28, 2025 — The Budget Lab estimates that 2025 U.S. tariffs, if left in place, would raise $2.7tn over 2026-35 under conventional scoring. Accounting for the tariffs' negative effects on output, the estimate includes an additional $456bn revenue loss, bringing projected dynamic revenue to $2.3tn over the decade.

AI Summary. The U.S. is the world's largest single source of demand for manufactured goods but remains far smaller than the rest of the world combined, implying foreign producers will mostly avoid bearing the direct cost of tariffs. Consistent with this, the dollar has fallen about 7% against trading partners' currencies while pre-tariff import prices rose about 1%.

Matt Klein The Overshoot
Date Posted:

The incidence of tariffs so far is on US consumers, notes Matt Klein. “If foreigners were going to eat the cost, [pre-tariff] import prices should have fallen enough to offset the tariff. Excluding food and fuels, [they] are up about 1% so far in 2025.”

Are foreign producers bearing the direct cost of U.S. tariffs?

Core argument: Pre-tariff prices of U.S. imported goods excluding food and fuels are up about 1% so far in 2025, per the BLS International Price Program, whereas import prices should have fallen if foreign producers were absorbing the tariff cost.

While the U.S. is the world’s largest single contributor to global demand— and is by far the world’s largest source of net demand for manufactured goods—it is still far smaller than the combined weight of the rest of the world. All this implies, using Miran’s framework, that foreign producers will mostly avoid the direct cost of the tariffs. One clue is that the dollar has fallen about 7% against a trade-weighted basket of the currencies of our trading partners since the start of 2025, with most of the drop occurring since most of the tariffs were first announced on April 2. The textbook response to a broad tariff increase is for the dollar to appreciate to reflect the change in the relative attractiveness of investing in the U.S. to make goods for the American market, compared to investing somewhere else and exporting. That is consistent with the data we have so far from the Bureau of Labor Statistics (BLS), which measures the prices of imports before tariffs as part of its International Price Program. The prices of imported goods (excluding food and fuels) are up about 1% so far in 2025. If foreigners were going to eat the cost, import prices should have fallen enough to offset the tariff impact.

Takeaways by Macro Roundup® AI

  1. Pre-tariff prices of U.S. imported goods excluding food and fuels are up about 1% so far in 2025, per the BLS International Price Program, whereas import prices should have fallen if foreign producers were absorbing the tariff cost.
  2. The dollar has fallen about 7% against a trade-weighted basket of U.S. trading partners' currencies since the start of 2025, with most of the drop since tariffs were announced on April 2, contrary to the textbook appreciation response to a broad tariff increase.
  3. The U.S. is the world's largest single contributor to global demand and by far the largest source of net demand for manufactured goods, yet remains far smaller than the rest of the world combined, implying under Miran's framework that foreign producers mostly avoid the direct cost of tariffs.

Related Articles:

  • State of U.S. Tariffs: July 28, 2025 — The Budget Lab estimates that 2025 U.S. tariffs, if left in place, would raise $2.7tn over 2026-35 under conventional scoring. Accounting for the tariffs' negative effects on output, the estimate includes an additional $456bn revenue loss, bringing projected dynamic revenue to $2.3tn over the decade.
  • Tariff Endgame — New tariffs would add roughly 1% of GDP to a federal tax burden that was 17% of GDP, an amount that aggregate corporate profits near $4tn and disposable personal income around $22tn could absorb at the cost of modestly slower activity. The burden would fall unevenly, concentrated in import-dependent sectors such as autos and clothing.
  • 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. An analysis of labor data finds a shrinking share of each graduating class is landing jobs requiring a bachelor's degree. At the 15 largest tech companies by market value, entry-level hires as a share of total new hires have fallen 50%, and recent graduates made up 7% of new hires, down from 11%.

Lindsay Ellis, Katherine Bindley and Rosie Ettenheim Wall Street Journal
Date Posted:

Between 2018–19 and 2023–25, Americans aged 22–27 with a bachelor’s degree saw a steep increase in their unemployment rate from 3.8% to 4.9%, while their high school peers’ unemployment rate increased by just 0.1% to 7.3%.

Is AI shrinking entry-level hiring for college graduates?

Core argument: Among the 15 largest tech companies by market capitalization, the share of entry-level hires relative to total new hires has fallen by 50% since 2019, according to venture-capital firm SignalFire.

With each new class after 2020, an ever-smaller share of graduates is landing jobs that require a bachelor’s degree, according to a Burning Glass Institute analysis of labor data. Venture-capital firm SignalFire found that among the 15 largest tech companies by market capitalization, the share of entry-level hires relative to total new hires has fallen by 50% since 2019. Recent graduates accounted for just 7% of new hires in 2024, down from 11% in 2022.

Takeaways by Macro Roundup® AI

  1. Among the 15 largest tech companies by market capitalization, the share of entry-level hires relative to total new hires has fallen by 50% since 2019, according to venture-capital firm SignalFire.
  2. Recent graduates accounted for 7% of new hires in 2024, down from 11% in 2022, according to SignalFire.
  3. A Burning Glass Institute analysis of labor data finds that with each graduating class after 2020, an ever-smaller share of graduates is landing jobs that require a bachelor's degree.

Related Articles:

  • Is AI Killing Graduate Jobs? — UK job postings for entry-level roles requiring a degree have fallen by almost two-thirds since 2022, twice the drop for all entry-level roles, with US listings down 43%. Analysis of US data shows no clear correlation between an occupation's exposure to generative AI and whether it lost young workers.
  • Educated but Unemployed, a Rising Reality for College Grads — Recent college graduates aged 22–27 account for 12% of the 60 basis-point rise in US unemployment, more than twice their 5% share of the labor force. In computer and mathematical occupations, employment for that age group has fallen 8% since 2022 while older workers' employment grew 0.8%.
  • Technological Disruption in the Labor Market — The authors measure US labor market structure since 1880 and find 1990–2017 less disruptive than any earlier period, because past changes from general-purpose technologies like steam and electricity were so profound. They identify four recent signs of accelerating change, including a 50%+ rise in science and technology employment share since 2010.

AI Summary. In the United States, mental despair once peaked in middle age but now declines steadily with age, a shift the authors attribute to rising despair among workers under 40. The hump-shaped age pattern persists among those unemployed or unable to work, while it remains flat for homemakers, students, and retirees.

David Blanchflower and Alex Bryson National Bureau of Economic Research
Date Posted:

Mental despair among non-workers continues to be hump-shaped in age over 2020–2024, but overall despair is now monotonically declining in age due to a sharp rise in distress among workers under 40, both male and female, compared to 2010–2015.

Why does mental despair now decline with age instead of peaking mid-life?

Core argument: In the United States the age–despair relationship, hump-shaped from the early 1990s through 2015 with a rise to middle age and decline later in life, now declines monotonically with age because of rising despair among the young.

Between the early 1990s and 2015 the relationship between mental despair and age was hump shaped in the United States: it rose to middle-age, then declined later in life. That relationship has now changed: mental despair declines monotonically with age due to a rise in despair among the young. However, the relationship between age and mental despair differs by labor market status. The hump-shape in age still exists for those who are unable to work and the unemployed. The relation between mental despair and age is broadly flat, and has remained so, for homemakers, students and the retired. The change in the age-despair profile over time is due to increasing despair among young workers. Whilst the relationship between mental despair and age has always been downward sloping among workers, this relationship has become more pronounced due to a rise in mental despair among young workers. Figure 7 repeats [an earlier exercise for 2010-15] for 2020-2024. As with 2010-15 the worker function slopes down, and the non-worker function is U-shaped. But now the ‘all’ function slopes down. Why? The reason is the markedly higher despair rates among workers under the age of 40, which have big weights in the overall calculation.

Takeaways by Macro Roundup® AI

  1. In the United States the age–despair relationship, hump-shaped from the early 1990s through 2015 with a rise to middle age and decline later in life, now declines monotonically with age because of rising despair among the young.
  2. The shift in the age–despair profile is attributed to increasing despair among young workers, whose already downward-sloping age–despair relationship has become more pronounced.
  3. Comparing 2020–2024 with 2010–15, the worker function still slopes down and the non-worker function is U-shaped, but the overall function now slopes down because of markedly higher despair rates among workers under 40, which carry large weights.

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AI Summary. China is displacing foreign imports in sectors that were core European export strengths, including autos, construction equipment, industrial robots, specialty chemicals, batteries, permanent magnets, solar panels, wind turbines, and high-speed rail. European exports to China have fallen by about half a percentage point of European GDP, and the EU's trade deficit with China is set to double.

Brad Setser Council on Foreign Relations
Date Posted:

China’s manufacturing boom is cannibalizing European exports. The EU’s trade deficit with China is set to double between 2020 and 2025 in euro terms.

Is China displacing European exports in its home market?

Core argument: European exports to China, measured by China's imports, are down about half a percentage point of European GDP over the last few years, with European exports falling steeply as a share of Europe's economy since 2022.

China is squeezing foreign imports out of its market. It hasn’t quite mastered top-of-the-line chips, protecting Taiwan. But it has mastered autos—both EVs and ICEs. And construction equipment. And industrial robots. And most specialty chemicals. And batteries, permanent magnets, solar PVs and their chemical precursors, industrial diamonds, wind turbines, and high-speed rail. While China hasn’t quite mastered the production of top-line civil aircraft, Comac is ramping up the production of the C919. Plus, there are signs that the Chinese content of the made-in-China Airbus narrow bodies is rising.* In other words, China’s continued manufacturing boom is eating into core European export strengths. Exports have been in steep fall as as a share of Europe's economy since 2022. European exports to China (measured by China’s imports) are now down about half a percentage point of European GDP over the last few years. The EU's trade deficit with China is set to double between 2020 and 2025 in euro terms.

Takeaways by Macro Roundup® AI

  1. European exports to China, measured by China's imports, are down about half a percentage point of European GDP over the last few years, with European exports falling steeply as a share of Europe's economy since 2022.
  2. The European Union's trade deficit with China is set to double between 2020 and 2025 in euro terms as China squeezes foreign imports out of its market.
  3. China has mastered production of autos, both electric and internal combustion, along with construction equipment, industrial robots, most specialty chemicals, batteries, permanent magnets, solar PVs, wind turbines and high-speed rail, eating into core European export strengths.

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  • 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.
  • 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.
  • US-China Trade Clash Risks Making Europe Dumping Ground for Cheap Goods — China's trade surplus with the European Union reached a record $90bn over four months, fueling concerns that the bloc could become a dumping ground for cheap Chinese goods facing higher US import barriers. Most rerouting of Chinese exports currently passes through Latin America and Southeast Asia.

AI Summary. China's manufacturing investment continues to rise, up 7.5% this year after a 9.5% increase the prior year, and one Chinese academic estimates the country's share of global manufacturing value-added could climb to 40% from about 27%. Chinese leadership has publicly questioned whether every province needs to develop artificial intelligence, computing power, and electric vehicles, criticizing excessive price competition.

Joe Leahy, Wenjie Ding, William Langley and Haohsiang Ko Financial Times
Date Posted:

28% of China’s car manufacturers and 31% of electrical machinery builders are losing money, up from 12% and 16% in 2011, respectively, yet Chinese investment in manufacturing is rising by 7.5% this year, following a 9.5% increase in 2024.

Is China's manufacturing investment still rising despite official concerns about overcapacity?

Core argument: China's manufacturing investment is up 7.5% this year after a 9.5% rise in 2024, with no end in sight to the expansion.

China’s investment in manufacturing is still rising at a blistering pace — up 7.5% this year after a 9.5% rise in 2024 — there is no end in sight. Yan Se, assistant professor in the department of applied economics at the Guanghua School of Management in Peking University, said at a recent seminar that China’s share of global manufacturing value-added could rise to 40% in the next five years, from about 27% now. Xi recently betrayed a rare note of exasperation at what Beijing calls neijuan, or involution — excessive price competition. “Artificial intelligence, computing power and new energy vehicles. Do all provinces in the country have to develop industries in these directions?” Xi told the Central Urban Work Conference, a high-level Communist party meeting on urban development, according to state media.

Takeaways by Macro Roundup® AI

  1. China's manufacturing investment is up 7.5% this year after a 9.5% rise in 2024, with no end in sight to the expansion.
  2. Yan Se, assistant professor of applied economics at Peking University's Guanghua School of Management, said China's share of global manufacturing value-added could rise to 40% within five years from about 27% now.
  3. Xi Jinping asked the Central Urban Work Conference whether all of China's provinces have to develop artificial intelligence, computing power and new energy vehicles, showing exasperation at what Beijing calls neijuan, or involution — excessive price competition.

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  • Industrial Colossus: China vs 1950s America — China's growth in its share of global manufacturing has slowed from roughly 1.5 percentage points per year in the early 2010s to just over 0.5 percentage points annually, about one-third the earlier pace. The author argues China's share of global manufacturing is likely near its peak.
  • Why US Tariffs Are Deflationary for China — China's exports to the US have fallen sharply while its exports to the rest of the world have risen by an almost offsetting amount. The author argues both adjustments are deflationary for China: routing goods through third countries raises transport costs and squeezes exporter margins, while redirecting goods to new markets requires cutting prices to generate demand.