Edward Conard

Top Ten New York Times Bestselling Author

  • “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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…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
  • “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
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, September 9, 2025

AI Summary. Artificial intelligence adoption is increasing across most sectors, with construction and manufacturing as exceptions, and those two sectors make up as much as 40% of firms with 250+ employees. The author argues that apparent declines in adoption among large companies are likely skewed by this composition, plus measurement error — an instance of Simpson's Paradox.

Paul Kedrosky Applied Complexity
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Applying a sector-by-sector analysis of Census Bureau survey data, Paul Kedrosky finds that AI adoption is sharply increasing in sectors outside of construction and manufacturing and is advancing in companies of all sizes.

Is AI adoption among large companies actually declining?

Core argument: Construction and manufacturing, the sectors with the lowest AI adoption rates, make up as much as 40% of the 250+ employee cohort, likely skewing Apollo's chart showing large companies reversing their AI adoption.

Most sectors are seeing sharply increasing AI adoption, with the unsurprising exceptions of construction and manufacturing. But those two sectors make up a large share of the 250+ employee cohort, as much as 40%. So [Apollo's chart showing that large companies are reversing their recent rate of adoption for AI] by employee count are likely skewed badly by companies with the lowest AI adoption rates of any form, further helping explain the "AI decline" graph, in addition to measurement error. This is a kind of example of Simpson's Paradox, where multiple subgroups within a larger population might show an improving trend, while a line of best fit through all the groups shows a declining one.

Takeaways by Macro Roundup® AI

  1. Construction and manufacturing, the sectors with the lowest AI adoption rates, make up as much as 40% of the 250+ employee cohort, likely skewing Apollo's chart showing large companies reversing their AI adoption.
  2. Most sectors show sharply increasing AI adoption, with construction and manufacturing as exceptions, suggesting the apparent "AI decline" among large firms reflects composition effects alongside measurement error.
  3. The apparent decline illustrates Simpson's Paradox, in which multiple subgroups each show an improving trend while a line of best fit through all groups slopes downward.

Related Articles:

  • Is AI Hitting A Wall? — Artificial intelligence gains have come from a formula of more data and more computing power, but companies have exhausted freely available internet training data and are now striking data-sharing deals with publishers and copyright holders. Training and running large models is energy-intensive, requiring vastly more Nvidia chips with each generation.
  • Honey, AI Capex Keeps Eating … Everything — The author estimates that AI-related capital spending contributed between 0.6% and 1.3% of a quarter's 3% U.S. GDP growth, based on information technology equipment and intellectual property investment data. Google, Amazon, Meta, and Microsoft alone spent about $69bn in the quarter, roughly half of all information technology equipment spending on an annualized basis.
  • AI Adoption Is Accelerating In 2025 — Nvidia's data center revenue growth is used as a simple extrapolation to project the broader capital-expenditure impact of AI-specific investment on GDP. The aim is not precision but a timely sense of whether the growth contribution from AI capital spending is accelerating or potentially peaking.

AI Summary. U.S. twelfth-graders' average math and reading scores on the National Assessment of Educational Progress fell to their lowest levels on record, with math the worst since that test began in 2005 and reading below any point since 1992. The share rated proficient slid 2 percentage points to 35% in reading and 22% in math.

Matt Barnum Wall Street Journal
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New National Assessment of Educational Progress results show the share of American high school seniors who scored basic or above on national tests fell to the lowest level on record: 68% in reading and 55% in math.

Have U.S. twelfth-grade math and reading scores fallen to record lows?

Core argument: U.S. twelfth-graders' average math score was the worst since the current National Assessment of Educational Progress math test began in 2005, and their reading score fell below any point since that assessment started in 1992.

American high-school seniors’ scores on major math and reading tests fell to their lowest levels on record, according to results released Tuesday by the U.S. Education Department. Twelfth-graders’ average math score was the worst since the current test began in 2005, and reading was below any point since that assessment started in 1992. The share of 12th-graders who were proficient slid by 2 percentage points between 2019 and 2024—to 35% in reading and 22% in math. The results are from tests that are part of the National Assessment of Educational Progress, administered to tens of thousands of students in early 2024. In reading, two-thirds of seniors could determine the purpose of a persuasive essay, but only one in five was able to draw a conclusion from such an essay, supported by the text. In math, 60% of students deduced the population of an area using information on size and density, while just under half correctly turned a real-world scenario into an algebraic expression.

Takeaways by Macro Roundup® AI

  1. U.S. twelfth-graders' average math score was the worst since the current National Assessment of Educational Progress math test began in 2005, and their reading score fell below any point since that assessment started in 1992.
  2. The share of U.S. 12th-graders scoring proficient fell 2 percentage points between 2019 and 2024, to 35% in reading and 22% in math, according to results released by the U.S. Education Department.
  3. In reading, two-thirds of seniors could determine the purpose of a persuasive essay but only one in five could draw a text-supported conclusion from it, while in math just under half converted a real-world scenario into an algebraic expression.

Related Articles:

  • Do Adults Have the Skills They Need to Thrive in a Changing World? — An international assessment of adult skills describes numeracy proficiency levels ranging from counting objects and adding small whole numbers at the lowest level, to extracting information from tables and graphs and performing basic arithmetic with money and percentages at Level 1, up to analysing complex mathematical information and critically evaluating whether data support a claim at Level 5.
  • Many Children Left Behind: The 2024 National Assessment of Educational Progress Results Indicate a Five-Alarm Fire — The share of US fourth-grade students meeting the National Assessment of Educational Progress reading proficiency standard fell from 35% in 2019 to 33% in 2022 and 30% in 2024. More fourth-graders now score below the basic level than score proficient.
  • Have Humans Passed Peak Brain Power? — The share of Americans reporting they read a book in the past year has fallen below half, alongside declining performance in numeracy and problem-solving in most countries. The share of adults unable to use mathematical reasoning to evaluate the validity of statements averages 25% in high-income countries and 35% in the US.

AI Summary. A study comparing survey responses of citizens and parliamentarians across 27 European countries finds that policymaking reflects voters' economic attitudes well, but the average parliamentarian is about one standard deviation more culturally liberal than the national mean voter. The author finds this cultural gap spans nearly all issues, countries, and established parties, and that right-wing populists fill it.

Laurenz Guenther Social Science Research Network
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Surveys in 27 European countries show that MPs’ policy views generally match those of their voters on economic issues, but are systematically to the left on cultural issues. This “representation gap” is filled by right-wing populist parties.

Do cultural gaps between lawmakers and voters explain populism's rise?

Core argument: Comparing identical survey policy questions answered by citizens and parliamentarians in 27 European countries, the author finds the average parliamentarian is about 1 standard deviation more culturally liberal than the national mean voter.

Populists are often defined as those who claim that they fill "political representation gaps" —differences between the policymaking by established parties and the "popular will." I study descriptively whether representation gaps exist and their relationship with populism. To this end, I analyze the responses of citizens and parliamentarians from 27 European countries to identical survey policy questions, which I compile and verify to be indicative of voting in referendums. I find that policymaking represents the economic attitudes of citizens well. However, I document that the average parliamentarian is about 1SD more culturally liberal than the national mean voter. This cultural representation gap is systematic in four ways: i) it arises on nearly all cultural issues, ii) in nearly all countries, iii) nearly all established parties are more culturally liberal than the national mean voter, and iv) all major demographic groups tend to be more conservative than their parliamentarians. Demographic differences between voters and parliamentarians or lack of political knowledge cannot fully account for representation gaps. Finally, I show that right-wing populists fill the cultural representation gap.

Takeaways by Macro Roundup® AI

  1. Comparing identical survey policy questions answered by citizens and parliamentarians in 27 European countries, the author finds the average parliamentarian is about 1 standard deviation more culturally liberal than the national mean voter.
  2. The cultural representation gap is systematic across nearly all cultural issues, nearly all countries, and nearly all established parties, with all major demographic groups tending to be more conservative than their parliamentarians.
  3. Policymaking represents citizens' economic attitudes well, demographic differences and lack of political knowledge cannot fully account for the representation gaps, and right-wing populists fill the cultural gap, according to the author.

Related Articles:

  • The Rich World Revolts Against Sky-High Immigration — 15m people moved to rich countries over three years, the biggest surge in modern history, with net migration exceeding 3m to America, 1.3m to Canada and about 700,000 to Britain. As immigration surged, output per person fell in Britain and Germany, partly because recent arrivals are on average less skilled than residents.
  • Changing Sub-Saharan Africa’s Growth Trajectory — Sub-Saharan Africa's working-age population is growing nearly 3% a year, versus close to zero in much of the world, and is projected to exceed China's within about a decade and reach a quarter of the global total. With modest productivity growth near 2%, the region is likely among the world's fastest-growing.
  • Europe Grasps for Ways to Stop the Migrant Surge — Around 1.14m people filed asylum claims in Europe in a year, the highest since the 2015 migration crisis, with claims expected to top 1m again; these figures exclude more than 4m Ukrainian refugees granted temporary protection in the European Union. Asylum seekers tend to be less educated and lower skilled than other immigrant groups.

AI Summary. France's 10-year government borrowing cost of 3.47% exceeds Greece's 3.35% and approaches Italy's 3.51%, after the French government fell over a deficit-cutting budget. The extra interest France pays over German bonds stands at 0.8 percentage points.

Ian Smith, Emily Herbert and Leila Abboud Financial Times
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As expected, French Prime Minister François Bayrou lost a no-confidence vote this Monday on his proposed budget-cutting measures. French 10-year yields, at 3.47%, are now above those of Greece, and closing in on Italy’s 3.51%.

Are French borrowing costs now exceeding those of Greece?

Core argument: France's 10-year borrowing costs stand at 3.47%, above Greece's 3.35% and near Italy's 3.51%, close to their highest level since the Eurozone debt crisis.

French Prime Minister François Bayrou lost a crucial confidence vote on his deficit-cutting budget efforts on Monday, bringing down his government and worsening a crisis that has already pushed Paris’s borrowing costs close to their highest level since the Eurozone debt crisis. At 3.47%, France’s benchmark 10-year borrowing costs are above those of longtime Eurozone troubled borrower Greece at 3.35%, and closing in on Italy at 3.51%, two of the borrowers long deemed riskier by global investors. The additional interest rate paid on France’s 10-year bonds over benchmark German Bunds — a measure of the additional borrowing costs investors are demanding to lend to Paris — rose back to 0.8 percentage points on Tuesday, as nerves continued over the economic outlook.

Takeaways by Macro Roundup® AI

  1. France's 10-year borrowing costs stand at 3.47%, above Greece's 3.35% and near Italy's 3.51%, close to their highest level since the Eurozone debt crisis.
  2. French Prime Minister François Bayrou lost a confidence vote on his deficit-cutting budget efforts, bringing down his government and worsening a crisis over France's borrowing costs.
  3. The additional interest rate France pays on 10-year bonds over German Bunds rose back to 0.8 percentage points, as nerves continued over the economic outlook.

Related Articles:

  • Back to the Barricades, and the Bond Spreads — The gap between French and German 10-year government bond yields is near the highs reached during France's political crises, and French stocks have resumed sharp underperformance versus the rest of Europe. France's finance minister warned the country might need assistance from the International Monetary Fund.
  • 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.
  • The Future of European Competitiveness – A Competitiveness Strategy for Europe — A European Union competitiveness report attributes the EU's labour productivity growth gap with the US largely to weaker activity in information and communications technology and large-scale digital services; excluding main ICT sectors, EU productivity was broadly at par with the US from 2000-2019. It estimates Europe's investment share must rise about 5 percentage points of GDP.

AI Summary. Gold has risen more than 37% over the year, its strongest annual showing in more than three decades and a plausible path toward $4,000 an ounce, even as the Nasdaq Composite Index sets records. Central bank accumulation has been crucial, with gold purchases topping 1,000 tons for a third consecutive year.

John Authers and Richard Abbey Bloomberg
Date Posted:

Gold is up 37% for the year, outperforming the “impressive, AI-fueled” S&P since the start of 2020. Central bank accumulation reached 1,000 tons for the third consecutive year.

Are central bank purchases driving gold's surge alongside record stock prices?

Core argument: Gold is up more than 37% for the year, on course for its strongest annual showing in more than three decades and on a plausible trajectory toward $4,000 an ounce.

Gold is up more than 37% for the year, and on course for its strongest annual showing in more than three decades. It’s on a plausible trajectory toward $4,000 an ounce. All of this seems strange as the Nasdaq Composite Index also hit yet another record. So far this decade, remarkably, it has beaten the AI-fueled gains of the S&P 500. Gold’s surge measured against the equity performance of the rest of the world is even more impressive, especially in the past year. Central bank accumulation has been crucial. Rohit Paul of Acuity Knowledge Partners shows that, for the third consecutive year, gold purchases topped 1,000 tons.

Takeaways by Macro Roundup® AI

  1. Gold is up more than 37% for the year, on course for its strongest annual showing in more than three decades and on a plausible trajectory toward $4,000 an ounce.
  2. Gold's surge coincides with the Nasdaq Composite Index hitting another record, and so far this decade gold has beaten the AI-fueled gains of the S&P 500.
  3. Central bank accumulation has been crucial to gold's rise, with purchases topping 1,000 tons for the third consecutive year, according to Rohit Paul of Acuity Knowledge Partners.

Related Articles:

  • Taking Stock: Dollar Assets, Gold, and Official Foreign Exchange Reserves — Gold accounts for about 10% of aggregate official foreign exchange reserves, roughly its level in the early 2000s. International Monetary Fund country data indicate most added official gold holdings came from a few central banks, with over half of reported accumulation from China and Russia and about a quarter from several emerging markets.
  • How Gold Became the World’s Refuge from Uncertainty — Gold prices reached a record intraday high in real terms, surpassing the prior 1980 peak, with roughly a 30% gain over the year. Central banks have bought more than 1,000 tonnes net annually for three years — record levels — led by emerging markets including China, India and Turkey as they scale back dollar exposure.
  • Gold Overtakes Euro as Global Reserve Asset, ECB Says — Gold has overtaken the euro as a global reserve asset, with central bank gold holdings reaching 36,000 tons, near the mid-1960s peak of 38,000 tons, helped by a 30% rise in the gold price. The European Central Bank finds countries geopolitically close to China and Russia accumulated gold more than others.

AI Summary. European defence technology start-ups have raised €2.4bn since the start of 2022, including €1.4bn in the first seven months of the most recent year, up from €30mn in 2020 and €150mn in 2021, according to PitchBook data. Three of them — drone makers Helsing, Quantum Systems and Tekever — are valued above €1bn.

Tim Bradshaw, Sylvia Pfeifer, Clara Murray, Laura Pitel, et al. Financial Times
Date Posted:

Europe now has 3 drone manufacturers with “unicorn” status as venture capital investment in the defense sector surges in both the US and Europe.

Is venture capital investment in European defence start-ups rising sharply?

Core argument: European defence technology start-ups have raised €2.4bn since the start of 2022, including €1.4bn in the first seven months of this year, up from €30mn in 2020 and €150mn in 2021, according to PitchBook data compiled for the Financial Times.

Investment in Europe’s booming defence technology start-ups has surged since Russia’s full-scale invasion of Ukraine, as venture capital firms abandon earlier caution and pile into military businesses. Companies in the sector have raised €2.4bn since the start of 2022 including €1.4bn in the first seven months of this year alone, up from just €30mn in 2020 and €150mn in 2021, according to data compiled for the Financial Times by PitchBook. The figures are the latest evidence of the strength of investor appetite for the wave of new companies developing everything from unmanned mini-submarines and autonomous drones to “bio-robotic” cockroaches. Europe now boasts three defence start-ups with a “unicorn” valuation of more than €1bn: drone makers Helsing, Quantum Systems and Tekever.

Takeaways by Macro Roundup® AI

  1. European defence technology start-ups have raised €2.4bn since the start of 2022, including €1.4bn in the first seven months of this year, up from €30mn in 2020 and €150mn in 2021, according to PitchBook data compiled for the Financial Times.
  2. Venture capital firms have abandoned earlier caution about military businesses since Russia's full-scale invasion of Ukraine, backing companies developing unmanned mini-submarines, autonomous drones and "bio-robotic" cockroaches.
  3. Europe has three defence start-ups with valuations above €1bn: drone makers Helsing, Quantum Systems and Tekever.

Related Articles:

  • The Intellectual Spoils of War? Defense RD, Productivity and International Spillovers — The authors estimate that a 10% increase in government-financed R&D, largely defense, is associated with a 4.3% rise in privately funded R&D across OECD countries, indicating "crowding in" rather than "crowding out." They also find international spillovers raise private R&D abroad, though the overall effect on US productivity growth is modest.
  • Behind NATO’s 2 Percent: Measuring the True Scope of Alliance Defense Investments and the NATO Defense Deficit — NATO's collective defense spending averaged 1.72% of GDP over roughly two and a half decades, below the alliance's agreed 2% threshold, leaving a cumulative shortfall the authors estimate at over $2tn that was not invested in force structure, modernization, and readiness. The authors argue closing the gap requires years of sustained investment beyond current commitments.
  • From Trains to Tanks: Germany’s Rearmament Marks Industrial Shift — Germany's defense spending has risen almost 80% since 2020 to over €90bn, according to NATO estimates, offering hiring growth in a country where nearly 250,000 manufacturing jobs have disappeared since the pandemic began. Four major defense contractors added more than 16,500 employees over three years, a gain exceeding 40%, and plan roughly 12,000 more hires.

Wednesday, September 10, 2025

AI Summary. U.S. median household income was $83,730, not statistically different from the prior year's $82,690, according to Census Bureau estimates. Across most demographic subgroups, median household income was higher or not statistically different from the prior year, with the exception of Black households, which saw a decline.

Melissa Kollar and Zach Scherer U.S. Census Bureau
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Real median household income was $83,730 in 2024, effectively flat from 2019’s $83,260.

Did median household income change over the past year?

Core argument: Median U.S. household income was $83,730 in 2024, not statistically different from the 2023 estimate of $82,690.

This report provides estimates of household income, income inequality, and worker earnings in the United States for 2024. Median household income was $83,730 in 2024, not statistically different from the 2023 estimate of $82,690. For most demographic subgroups analyzed, the median household income estimates in 2024 were either higher or not statistically different from 2023, with the exception of Black households, which experienced a decline in median household income.

Takeaways by Macro Roundup® AI

  1. Median U.S. household income was $83,730 in 2024, not statistically different from the 2023 estimate of $82,690.
  2. Across most demographic subgroups analyzed, 2024 median household income estimates were either higher than or not statistically different from 2023.
  3. Black households were the exception among the subgroups analyzed, experiencing a decline in median household income.

Related Articles:

  • Trends in the Distribution of Family Wealth, 1989 to 2022 — The Congressional Budget Office estimates that the top 10% of U.S. families held 60% of all wealth in 2022, up from 56% in 1989, with the top 1% holding 27%, up from 23%. The rest of the top half saw its share fall from 37% to 33%, while the bottom half held 6% in both years.
  • The Era of Big Raises for Low-Paid Workers Is Over — Wage growth for the bottom quarter of US earners was 3.7%, around the lowest since 2017, versus 4.7% for the top quarter, according to the Federal Reserve Bank of Atlanta. Bank of America customer data show after-tax pay up 1.6% year-over-year for the bottom third of households versus 2.9% for the top third.
  • The Unexpected Compression: Competition at Work in the Low Wage Labor Market — Labor market tightness produced an unexpected compression in the US wage distribution, with disproportionate wage growth at the bottom reducing the college wage premium and reversing nearly 40% of the rise in 90-10 wage inequality since 1980. The authors attribute this in part to increased competition for low-wage workers.

AI Summary. Central banks' gold accumulation is generally not associated with reducing the dollar's share of international reserves at the country level, apart from a few prominent cases, and is more consistent with modest overall diversification. Gold's role as an official-sector store of value has grown, but its use as a unit of account and medium of exchange remains limited.

Colin Weiss Federal Reserve Board
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Gold as a share of world central bank reserves increased from ~12% to ~17% btw 2000–2024. Weiss argues this is part of “diversification not solely aimed at the dollar share” and there has been little erosion of the dollar’s role in invoicing and trade.

Does central bank gold buying signal a retreat from the dollar?

Core argument: Central bank gold accumulation is generally not associated with de-dollarization of international reserves at the country level, except in a few prominent cases, the author argues from data on reserve currency composition and official sector purchases of U.S. assets.

I examine how governments have managed their holdings of gold and dollar reserves in recent decades, a period when gold’s share of aggregate international reserves rose and the dollar’s share fell. Using data on central banks’ reserve currency composition and official sector purchases of U.S. assets, I argue that gold reserve accumulation is generally not associated with de-dollarization of international reserves at the country level, except in a few prominent cases. Instead, gold purchases are more consistent with most countries pursuing a modest diversification of international reserves that does not solely target a reduced dollar share. My evidence suggests that this characterization also applies to gold reserve accumulation in 2022 and 2023. Finally, I show that, while gold’s importance as a store of value for the official sector has grown since 2000, its use as a unit of account and a medium of exchange remains limited.

Takeaways by Macro Roundup® AI

  1. Central bank gold accumulation is generally not associated with de-dollarization of international reserves at the country level, except in a few prominent cases, the author argues from data on reserve currency composition and official sector purchases of U.S. assets.
  2. Gold's share of aggregate international reserves rose while the dollar's share fell in recent decades, a pattern the author reads as most countries pursuing modest reserve diversification rather than solely targeting a reduced dollar share, including in 2022 and 2023.
  3. Gold's importance as a store of value for the official sector has grown since 2000, while its use as a unit of account and a medium of exchange remains limited.

Related Articles:

  • All That Glitters Is Cognitive Dissonance — Gold has risen more than 37% over the year, its strongest annual showing in more than three decades and a plausible path toward $4,000 an ounce, even as the Nasdaq Composite Index sets records. Central bank accumulation has been crucial, with gold purchases topping 1,000 tons for a third consecutive year.
  • Taking Stock: Dollar Assets, Gold, and Official Foreign Exchange Reserves — Gold accounts for about 10% of aggregate official foreign exchange reserves, roughly its level in the early 2000s. International Monetary Fund country data indicate most added official gold holdings came from a few central banks, with over half of reported accumulation from China and Russia and about a quarter from several emerging markets.
  • How Gold Became the World’s Refuge from Uncertainty — Gold prices reached a record intraday high in real terms, surpassing the prior 1980 peak, with roughly a 30% gain over the year. Central banks have bought more than 1,000 tonnes net annually for three years — record levels — led by emerging markets including China, India and Turkey as they scale back dollar exposure.

AI Summary. Computer and electronic products manufacturers import 37% of their intermediate inputs and capital equipment, chemical manufacturers 33%, and transportation equipment manufacturers 27%. Broad tariffs may push some sourcing domestically over time, but many inputs will simply cost more, making American manufacturers less competitive globally.

Jiaxin He and Connor O'Brien Agglomerations
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US advanced manufacturers import between 27% and 39% of their intermediate inputs and capital equipment. Jiaxin He and Connor O’Brien argue tariffs “are likely to backfire, raising costs for American factories and slowing reindustrialization.”

Do broad tariffs make high-tech manufacturers less competitive globally?

Core argument: Computer and electronic products manufacturers import 37% of their intermediate inputs and capital equipment.

Computer and electronic products manufacturers import 37% of their intermediate inputs and capital equipment. Chemical manufacturers — primarily pharmaceutical and petrochemical firms — import 33% of their inputs and equipment. Transportation equipment manufacturers — producers of ships, trains, planes, and military vehicles — import 27%. High and broad tariffs may result in American manufacturers sourcing more inputs domestically over time. But many inputs will simply become more expensive, making domestic manufacturers less competitive globally.

Takeaways by Macro Roundup® AI

  1. Computer and electronic products manufacturers import 37% of their intermediate inputs and capital equipment.
  2. Chemical manufacturers, primarily pharmaceutical and petrochemical firms, import 33% of their inputs and equipment, while transportation equipment producers of ships, trains, planes, and military vehicles import 27%.
  3. High and broad tariffs may push American manufacturers to source more inputs domestically over time, but many inputs will simply become more expensive, making domestic manufacturers less competitive globally.

Related Articles:

AI Summary. Foreign portfolio inflows into China have been flat for the past three years following large outflows, while non-China emerging markets have seen a strong rebound in non-resident portfolio inflows. After earlier global market shocks, flows into China rebounded strongly; the most recent bounce back has been far shallower.

Robin Brooks Robin Brooks Substack
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Since Russia’s 2022 invasion of Ukraine, China, unlike other emerging markets, has seen muted capital inflows. Robin Brooks argues this suggests investors are “putting a greater weight on geopolitical risk in the case of China.”

Are foreign portfolio flows into China lagging other emerging markets?

Core argument: Foreign portfolio inflows into China have been flat for the past three years following large outflows in 2022, measured as a rolling four-quarter moving average of non-resident flows scaled by dollar-denominated GDP.

The left chart aggregates up quarterly non-resident portfolio flows into the world’s top 25 emerging markets. The chart aggregates these flows by region, makes a rolling four-quarter moving average and divides this by the Dollar-denominated GDP for all these countries. I’ve denoted key turning points in global markets, like the start of the global financial crisis in Q1 2008, China’s RMB devaluation scare in Q3 2015 and the invasion of Ukraine in Q1 2022. After the first two of these turning points, non-resident flows to China (red bars) bounce back strongly, but the invasion of Ukraine is clearly different. The bounce back is far shallower and - factoring in big outflows in 2022 - foreign portfolio inflows into China have been flat for the past three years. This contrasts with non-China EM, where non-resident portfolio inflows continue to look healthy. The right chart is exactly the same as the left, except that it drops China from the numerator (flows) and the denominator (GDP). It turns out that non-China EM has seen a strong rebound in non-resident portfolio inflows, which makes tepid flows into China even more notable.

Takeaways by Macro Roundup® AI

  1. Foreign portfolio inflows into China have been flat for the past three years following large outflows in 2022, measured as a rolling four-quarter moving average of non-resident flows scaled by dollar-denominated GDP.
  2. Non-resident portfolio inflows to emerging markets excluding China have rebounded strongly, in contrast to the tepid flows into China.
  3. After the Q1 2008 onset of the global financial crisis and China's Q3 2015 RMB devaluation scare, non-resident flows to China bounced back strongly, but the rebound following the Q1 2022 invasion of Ukraine was far shallower.

Related Articles:

  • World’s Top Hedge Fund Bridgewater Dumps All China Stocks In Retreat From Market — Hedge fund Bridgewater exited positions in 16 Chinese stocks worth a combined $1.41bn and closed its indirect exposure through China-focused exchange-traded funds, according to its US regulatory filing. The firm shifted toward US mega-cap technology stocks, raising its stakes in Nvidia by 154%, Microsoft by 112%, Meta Platforms by 90% and Alphabet by 84%.
  • How China’s New Naval and Air Sites Would Aid an Attack on Taiwan — Satellite images and other open-source material examined by The Wall Street Journal show China building air and naval facilities along its eastern coast, including a large base for amphibious warships and a multibillion-dollar airport about 3 miles from front-line Taiwanese islands. Analysts say the sites would strengthen China's position in an invasion of Taiwan.
  • Buffett Praises BYD and TSMC After Selling Shares of Both Firms — Berkshire Hathaway reduced its stake in Taiwan Semiconductor Manufacturing by 86%, a sale that could have fetched $3.7bn at the average share price over the period. The decision was attributed to concerns over geopolitical tensions between China and Taiwan, not to any reassessment of the business or its management.