Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, October 20, 2025

AI Summary. Measures of the extra value investors place on U.S. Treasuries for their liquidity and safety have declined, with the AAA-corporate-to-Treasury spread falling from 67 to 36 basis points and the 10-year swap spread moving from 2 to 26 basis points. Such declines are consistent with large fiscal deficits and higher government debt.

Julian Kozlowski and Nicholas Sullivan Federal Reserve Bank of St. Louis
Date Posted:

The “convenience yield” of US Treasuries, as measured by the yield of AAA corporates over government bonds, fell from a mean 67bps over 2012–19 to 36 bps in 2025, consistent with the increased relative supply of government debt raising financing costs.

Has the extra value investors place on Treasuries declined?

Core argument: The AAA–U.S. Treasury spread fell from a 2012–2019 mean of 67 basis points to a 2025 mean of 36 basis points.

The convenience yield of U.S. Treasuries reflects the extra value investors place on Treasuries beyond the present value of the securities’ cash flows - it reflects the value of the liquidity and safety provided by the Treasuries. The convenience yield lowers the interest payments on government debt, which is a source of seigniorage [implicit government revenue]. The reduction in the convenience yield of U.S. Treasury securities, particularly for long-maturity spreads, has been notable. Specifically [comparing the mean 2025 value of each spread measure to its 2012 to 2019 mean], the AAA-UST spread has decreased from 67 to 36 basis points. Additionally, the 10-year swap spread has shifted from 2 to 26 basis points, and the 18-month box spread [the difference between the Treasury rate and an estimate of the implicit risk-free rate used to price call and put options on the S&P 500] has contracted from 34 to 9 basis points. These changes appear consistent with the current environment of elevated fiscal deficits and increased government debt. Such conditions typically reduce the convenience yield and contribute to higher long-term yields.

Takeaways by Macro Roundup® AI

  1. The AAA–U.S. Treasury spread fell from a 2012–2019 mean of 67 basis points to a 2025 mean of 36 basis points.
  2. The 10-year swap spread shifted from 2 basis points in 2012–2019 to 26 basis points in 2025, and the 18-month box spread contracted from 34 to 9 basis points.
  3. The convenience yield on Treasuries, reflecting the value investors place on their liquidity and safety, lowers government interest payments as a form of seigniorage, and its decline appears consistent with elevated fiscal deficits and increased government debt.

Related Articles:

  • Fiscal Risk from Rising Bond Yields — US interest rates fell for roughly 40 years before the pandemic, allowing maturing high-coupon debt to be refinanced at lower rates and keeping federal interest expense manageable even as debt rose. Because Congressional Budget Office projections assume the 10-year Treasury yield drifts down to 3.8% from about 4.1%, the author argues its debt-service projections face upside risk.
  • Why Microsoft Has Lower Borrowing Costs Than the U.S. — Two AAA-rated Microsoft bonds trade at yields slightly below equivalent U.S. Treasurys, an unusual negative spread given that companies are more likely to default than a government able to tax and that corporate bonds are harder to sell. Demand for high-quality corporate debt has compressed the AAA corporate spread to 0.3 percentage point over Treasurys.
  • JPMorgan Is Worried About Who’s Going to Buy All the Bonds — JPMorgan analysts estimate that the Federal Reserve's Treasury holdings have fallen $180bn as it pursues quantitative tightening, while commercial banks' holdings are down $60bn and foreign official holdings down $50bn. The analysts describe simultaneous negative demand from all three buyer types as rare and say they remain concerned about the lack of structural demand for Treasuries.

AI Summary. The Bank of Japan's holdings of Japanese government bonds are so large that maturing bonds exceed gross purchases, making it a net seller equal to -2.6% of GDP over a recent one-year period. Further cuts to gross buying would deepen the decline in its holdings and likely push longer-term Japanese yields higher.

Robin Brooks Robin Brooks Substack
Date Posted:
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In 2025H2, BoJ was a net seller of JGB’s to the tune of 2.6% of GDP, as maturing debt exceeded mean gross monthly purchases of ¥4.7T. A planned reduction in purchases to a mean of ¥2T “will likely send longer-term yields even higher.”

Is Japan's central bank now a net seller of government bonds?

Core argument: The Bank of Japan was a net seller of Japanese government bonds equal to -2.6% of GDP in the year through Q2 2025, as maturing holdings exceeded gross purchases.

BoJ’s holdings of JGBs are so massive that a huge amount of these bonds are maturing every month. This means that net purchases of JGBs by the BoJ are already substantially negative, even as it remains a buyer on a gross basis. The chart shows how important this phenomenon is. It shows net new supply (black line) of JGBs, which is basically Japan’s budget deficit, and the various buyers of that debt. In the year through Q2 2025, the BoJ was a net seller of JGBs to the tune of -2.6% of GDP (blue bars). During this time, the BoJ bought on average ¥4.7 trillion in JGBs on a gross basis every month. Taking this number down to ¥2 trillion implies a massive fall in BoJ holdings of JGBs on a net basis, which will likely send longer-term yields in Japan even higher than they already are.

Takeaways by Macro Roundup® AI

  1. The Bank of Japan was a net seller of Japanese government bonds equal to -2.6% of GDP in the year through Q2 2025, as maturing holdings exceeded gross purchases.
  2. The Bank of Japan bought an average of ¥4.7 trillion of JGBs monthly on a gross basis in that period, and cutting that pace to ¥2 trillion implies a large fall in its net holdings.
  3. A further decline in Bank of Japan net JGB holdings will likely push Japan's longer-term yields higher still, with net new supply of JGBs corresponding to Japan's budget deficit.

Related Articles:

  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.
  • The Global Debt Crisis — Market pricing for Japan's 10-year government bond yield 20 years from now stands at 4.52%, far above its current 10-year yield of 1.69%, while France's equivalent forward yield is 5.03% versus a 3.57% 10-year yield. The author argues these large risk premiums, alongside a falling Yen, signal mounting fiscal stress.
  • Japan’s Labor Market Under Demographic Decline: Evolving Dynamics and Macroeconomic Implications — Japan's fertility rate stood at 1.15 in 2024 and its working-age population peaked in 1995, with the total population peaking in 2008. Rising labor force participation among women and people 65 and over has more than offset the shrinking working-age population, but further gains are limited since both rates already rank among the highest internationally.

AI Summary. An analysis estimates most rich countries could keep debt stable as a share of their economies with only small primary surpluses—Britain's required surplus is 0.3% of GDP—even if all debt were refinanced immediately at current rates, but the tightening needed to stabilize debt ratios exceeds 2% of GDP in Britain and America and 3% in France.

Henry Curr The Economist
Date Posted:
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At current 5-year yields, stabilizing debt/GDP would require a reduction in the primary deficit of 2.3% of GDP in the UK and the US, and 3% in France. Maturing American debt will be refinanced at rates ~200bps higher than today’s.

How much tightening do rich countries need to stabilize debt ratios?

Core argument: The Economist calculates that most rich countries could still run small primary deficits and keep debt stable as a share of GDP even if all their debt were refinanced immediately at today's rates, with Britain needing the largest primary surplus at 0.3% of GDP.

The Economist calculates that most rich countries could still run small primary deficits [deficits net of interest payments] and keep debts stable as a share of their economies, even if they had to refinance all their debt immediately at today’s rates. The largest primary surplus required to balance debts is in Britain, at just 0.3% of GDP. That is not large for countries in a pinch. In the late 1990s Italy ran primary surpluses of 3-6% of GDP to bring down debts before joining the euro. In Britain and America, deficits are large. The belt tightening needed to stabilise the debt-to-GDP ratio exceeds 2% of GDP; in France it is greater than 3% of GDP. Things look worse still when you consider the coming wave of spending on ageing populations, defence and the climate transition. And higher debt interest costs to come are not yet fully accounted for. About half of outstanding debt with a fixed interest rate in the OECD club of rich countries costs less than 2% a year to service —a legacy of having issued the debt when rates were low. American debt worth a quarter of the country’s GDP will come due between 2025 and 2027. Reissuing it at 2024 yields would increase the interest rate paid by about two percentage points.

Takeaways by Macro Roundup® AI

  1. The Economist calculates that most rich countries could still run small primary deficits and keep debt stable as a share of GDP even if all their debt were refinanced immediately at today's rates, with Britain needing the largest primary surplus at 0.3% of GDP.
  2. Belt tightening needed to stabilise the debt-to-GDP ratio exceeds 2% of GDP in Britain and America and 3% of GDP in France, before accounting for coming spending on ageing populations, defence and the climate transition.
  3. About half of outstanding fixed-rate debt in the OECD costs less than 2% a year to service, and American debt worth a quarter of GDP comes due between 2025 and 2027, with reissuance at 2024 yields raising the interest rate paid by about two percentage points.

Related Articles:

  • Data Update 4 for 2025: Interest Rates, Inflation and Central Banks! — Interest rates are ultimately driven by macroeconomic fundamentals, with an "intrinsic risk-free rate" defined as the sum of the inflation rate and real GDP growth tracking the observed 10-year Treasury bond yield closely. On this view, central banks' influence comes from preferential access to data on those fundamentals, their capacity to alter them, and their credibility.
  • Fiscal Risk from Rising Bond Yields — US interest rates fell for roughly 40 years before the pandemic, allowing maturing high-coupon debt to be refinanced at lower rates and keeping federal interest expense manageable even as debt rose. Because Congressional Budget Office projections assume the 10-year Treasury yield drifts down to 3.8% from about 4.1%, the author argues its debt-service projections face upside risk.
  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.

AI Summary. Outside the AI-driven data center buildout financed from large tech companies' cash flows, U.S. business capital spending shows little sign of a broader cycle, with bank commercial and industrial loans showing almost no growth at both large and small banks. Most bank loan growth has instead gone to non-depository financial institutions.

Joseph Wang Fed Guy Blog
Date Posted:

Noting that revised data show essentially “no growth” in loans from commercial banks over the course of the year, Joseph Wang argues that “outside of the AI-driven capex boom, U.S. businesses do not appear to be embarking upon a capex cycle.”

Is business capital spending broadening beyond the data center buildout?

Core argument: U.S. bank commercial and industrial loans show almost no growth despite the Administration's tax incentives and push for banking deregulation, and revisions that more accurately classify loans have reduced C&I loans outstanding.

Outside of the AI driven capex boom, U.S. businesses do not appear to be embarking upon a capex cycle. The large tech companies are undertaking massive data center projects financed out of their cash flows, but most other businesses require financing to undertake capex projects. The Administration provided tax incentives and pushed for banking deregulation, but bank C&I [Commercial and Industrial] loan data show almost no growth. A series of revisions that more accurately classify loans have actually reduced the amount of C&I loans outstanding. Limited C&I loan growth is seen in both large and more lightly regulated small banks, so it is unlikely a regulatory constraint. The bulk of bank loan growth this year has instead gone to non-depository financial institutions.

Takeaways by Macro Roundup® AI

  1. U.S. bank commercial and industrial loans show almost no growth despite the Administration's tax incentives and push for banking deregulation, and revisions that more accurately classify loans have reduced C&I loans outstanding.
  2. Outside the AI-driven capex boom, U.S. businesses do not appear to be embarking upon a capex cycle, as large tech companies finance data center projects out of cash flow while most other firms require financing.
  3. Limited C&I loan growth at both large banks and more lightly regulated small banks makes a regulatory constraint unlikely, with the bulk of bank loan growth instead going to non-depository financial institutions.

Related Articles:

  • Goosing Credit Supply — Faster loan growth at lightly regulated smaller banks, credit unions, and private credit compared with large banks suggests post-2008 rules that raised capital and liquid-asset requirements with bank size have constrained large-bank lending. With loan growth currently limited more by demand than supply, easing large-bank requirements may mainly shift existing loans toward large banks.
  • The Secular Decline of Bank Balance Sheet Lending — Traditional bank balance sheet lending has declined as a share of credit intermediation, with credit increasingly channeled through arms-length transactions such as securitization. A structural model attributes falling lending shares to lower securitization costs, savers' behavior driving bank balance sheet size, and implicit bank costs and subsidies shaping balance sheet composition.
  • Has Private Credit Broken the High-Yield Spread Signal? — The high-yield bond market has stayed at about $1.4tn while private credit assets have grown to as much as $2tn, and the highest-rated BB portion of the high-yield index has risen from 41% to 51%. Private markets have shifted riskier borrowers out of high yield, making that index safer.

AI Summary. California's share of US tech jobs has fallen from nearly 19% before the pandemic to nearly 16%, including a further 0.4% decline over the past year. The remaining jobs skew high-paying: California's share of information-sector compensation is slightly above its pre-pandemic peak, with nearly a third of all tech wages and benefits going to state residents.

Joseph Politano Apricitas Economics
Date Posted:

California’s share of US tech jobs is the lowest in a decade, falling from nearly 19% in late 2019 to just over 16% today. Californians maintain an advantage in high-end jobs, earning ~⅓ of the industry’s total compensation – above the 2019 level.

Is California losing tech jobs while keeping the highest-paying ones?

Core argument: California's share of US tech jobs has fallen from nearly 19% before COVID to nearly 16%, including a further 0.4% decline over the last year.

Before COVID, nearly 19% of all US tech jobs were located in the Golden State; today that share is down to nearly 16%. Over the last year alone, California's share of tech employment has declined by another 0.4%. The good news for Californians is that while tech-sector jobs continue to leave the state, the jobs that remain are disproportionately high-paying. The share of information sector compensation going to Californians is actually up slightly from its pre-pandemic peak even as the share of information-sector employment has shrunk dramatically. Nearly one-third of all tech-related wages and benefits still go to residents of the Golden State.

Takeaways by Macro Roundup® AI

  1. California's share of US tech jobs has fallen from nearly 19% before COVID to nearly 16%, including a further 0.4% decline over the last year.
  2. California's share of information-sector compensation is up slightly from its pre-pandemic peak even as its share of information-sector employment has shrunk, with the tech jobs remaining in the state disproportionately high-paying.
  3. Nearly one-third of all US tech-related wages and benefits still go to California residents.

Related Articles:

  • California Mints Millionaires Faster Than They Can Leave — The number of California residents with incomes of $1m or more grew by 61,900, or 66%, from 2019 to 2021, lifting the state's share of US millionaires to 17.9% from 17% while the shares of New York, Texas, and Florida fell. Rising in-state incomes minted more new millionaires than the net outflow of higher-earning taxpayers to other states.
  • Behavioral Responses to State Income Taxation of High Earners: Evidence from California — A California ballot measure raising top marginal income tax rates by up to 3 percentage points prompted an additional 0.8% of the affected tax base to leave the state, with an estimated income elasticity of 2.5–3.2 for high earners who stayed. The authors estimate these responses eroded 45.2% of windfall revenues within one year and 60.9% within two.
  • Where is Standard of Living the Highest? Local Prices and the Geography of Consumption — The authors estimate that geographical differences in cost of living are especially large for low-income US households, and that expensive cities offer college graduates a standard of living similar to affordable cities while offering less-educated households a lower one. A high school dropout household moving from the most affordable to the most expensive commuting zone would see consumption fall 18.5%.

AI Summary. State regulators have approved home insurance rate increases averaging 50% and auto increases averaging 42%, outpacing a 26% rise in consumer prices over the same period, according to S&P Global Market Intelligence and Labor Department data.

Jean Eaglesham Wall Street Journal
Date Posted:

Over the past five years, state regulators nationwide have approved cumulative mean rate increases of 50% for home insurance and 42% for automotive insurance, outpacing the 26% rise in consumer prices over the period.

Are insurance rates rising faster than consumer prices?

Core argument: State regulators have approved home insurance rate increases averaging 50% and auto increases averaging 42% since the start of 2020, according to S&P Global Market Intelligence data.

Since the start of 2020, state regulators have agreed to rate increases averaging 50% for home insurance and 42% for auto, far outstripping the 26% increase in consumer prices through August, S&P Global Market Intelligence and Labor Department data show.

Takeaways by Macro Roundup® AI

  1. State regulators have approved home insurance rate increases averaging 50% and auto increases averaging 42% since the start of 2020, according to S&P Global Market Intelligence data.
  2. Approved home and auto insurance rate increases since the start of 2020 far outstrip the 26% rise in consumer prices through August, according to Labor Department data.
  3. Rising home and auto insurance costs have revived discussion of price caps on insurance rates.

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.

Tuesday, October 21, 2025

AI Summary. The authors argue inflation's baseline is now higher than pre-pandemic, with 2% acting more as a floor than a ceiling, noting disinflation has largely stalled and core inflation has run above target on a six-month annualized basis for five years. They expect a structurally wider range of inflation outcomes, skewed to the upside and centered higher than in the 2010s.

Ziad Hindo and James Riseley Bridgewater Associates
Date Posted:

Hindo and Riseley suggest that inflation risk is “tilted asymmetrically to the upside and centered higher than the 2010s.” A continuation of the 4% per year inflation of the first half of the 2020s would represent a “return to baseline.”

Is 2% inflation now a floor rather than a ceiling?

Core argument: Core inflation has run above the Fed's target in six-month annualized terms for five straight years, and disinflation has basically stalled out for much of the last 12–18 months, with 2% now more a floor than a ceiling.

The resting heart rate of inflation looks higher than it did pre-pandemic, with 2% more a floor than a ceiling. On the one hand, inflation is benign relative to pandemic-era highs and our systematic estimates expect it to continue falling somewhat. On the other hand, it is still clearly a thorn in the Fed’s side, disinflation has basically stalled out for much of the last 12–18 months, and core has now been running above target (in six-month annualized core terms) for five whole years. The last half-mile is the hardest, and failing to get there can result in sustained inflation accrual that is painful for most portfolios. The 1970s and 1980s are the canonical proof point that once you’ve let the cat out of the bag, it can be hard to get it back in. One inflation wave can lay the foundations for the second by attuning players in the economy to inflation and rewiring how they respond to price pressures—even ones quite divorced from the initial price shock. That amplifies the risks associated with subsequent shocks and all else equal increases the odds they manifest in wage-price spirals. We expect a structurally wider cone of inflation outcomes, tilted asymmetrically to the upside and centered higher than the 2010s.

Takeaways by Macro Roundup® AI

  1. Core inflation has run above the Fed's target in six-month annualized terms for five straight years, and disinflation has basically stalled out for much of the last 12–18 months, with 2% now more a floor than a ceiling.
  2. The authors expect a structurally wider cone of inflation outcomes, tilted asymmetrically to the upside and centered higher than in the 2010s, even as their systematic estimates expect inflation to continue falling somewhat.
  3. One inflation wave can lay the foundations for a second by attuning economic players to inflation and rewiring how they respond to price pressures, amplifying the odds that subsequent shocks manifest in wage-price spirals, with the 1970s and 1980s as the canonical proof point.

Related Articles:

  • Are We Heading For A New Inflation Surge? — The analysis finds post-pandemic headline and core inflation closely tracking the pattern of the early 1970s, with the spike in each case taking about three years to be brought under control and followed by roughly 18 months of relative stability. If the parallel holds, a renewed inflation flare-up would be expected.
  • Data Update 4 for 2025: Interest Rates, Inflation and Central Banks! — Interest rates are ultimately driven by macroeconomic fundamentals, with an "intrinsic risk-free rate" defined as the sum of the inflation rate and real GDP growth tracking the observed 10-year Treasury bond yield closely. On this view, central banks' influence comes from preferential access to data on those fundamentals, their capacity to alter them, and their credibility.
  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.

AI Summary. The authors estimate that a 25% tariff on European still wines led foreign producers to cut prices by 5.2%, leaving about 25% of tariff revenue borne abroad, while U.S. importers raised distributor prices 5.4% and consumer prices rose 6.9%. Because markups compound across stages, the dollar increase in consumer costs can exceed the tariffs actually paid.

Aaron Flaaen, Ali Hortaçsu, Felix Tintelnot, Nicolás Urdaneta, et al. National Bureau of Economic Research
Date Posted:

Data from the 2019–2021 period of US tariffs on European wines show that ~25% of the tariff at the border is paid by foreign producers, but after augmentation by markups at the distributor-retailer level, the $ pass-through to consumers exceeds 100%.

Who bears the cost of tariffs along the supply chain?

Core argument: Foreign producers lowered prices by 5.2% following the applied 25% U.S. tariff on still wines with ≤14% alcohol by volume, with roughly 25% of tariff revenue paid by foreign producers and the remainder paid within the United States.

In order to estimate the price effects of the tariffs, we exploit the fact that they were levied only on still wines with ≤ 14% alcohol by volume. We compare price changes along the distribution chain for products that were tariffed to a control group of wines that were not tariffed. We find that tariff pass-through at the border is incomplete, as foreign producers lower their price by 5.2% following the applied 25% tariff; ~25% of the tariff revenue is paid by foreign producers, while the remainder is paid within the United States. At the next stage of the chain, we find the U.S. importer increases the price charged to their distributors by an average of 5.4%. Tariff pass-through continues to be incomplete at this subsequent stage: the importer absorbs some portion of the tariffs as lower markups. Finally, tracking these particular wines at the stage of final sales by retailers, we find that the consumer price increases by 6.9%. While such a % increase implies incomplete pass-through given a 25% tariff, the multiple stages of markups implies the corresponding dollar value change in consumer prices could be higher than the actual tariffs paid. For example, for a wine that costs $5 at the border prior to tariffs, our point estimate implies $1.59 in higher consumer costs relative to $1.19 in tariffs paid per bottle [see chart].

Takeaways by Macro Roundup® AI

  1. Foreign producers lowered prices by 5.2% following the applied 25% U.S. tariff on still wines with ≤14% alcohol by volume, with roughly 25% of tariff revenue paid by foreign producers and the remainder paid within the United States.
  2. U.S. importers raised the prices charged to distributors by an average of 5.4% and consumer prices rose 6.9%, both indicating incomplete pass-through of the 25% tariff.
  3. Because markups apply at multiple stages, the estimates imply that a wine costing $5 at the border before tariffs generates $1.59 in higher consumer costs against $1.19 in tariffs paid per bottle.

Related Articles:

  • Goods Inflation And The Tariffs — Tariff pass-through to consumer goods prices has varied widely by category, with household appliances and household supplies passing on nearly all or more than the estimated tariff cost while clothing, new cars, and telephone equipment show minimal or negative price effects. Across 19 products the authors estimate about 50% pass-through to consumption goods prices.
  • 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.
  • The U.S. Is Not “Winning the Trade War” — 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%.

AI Summary. The US has exempted dozens of products from its reciprocal tariffs and offered to carve out hundreds more, from farm products to airplane parts, for countries that strike trade deals. The administration is simultaneously expanding tariffs grounded in Section 232 of the Trade Expansion Act, covering metals, autos, heavy trucks, pharmaceuticals and furniture.

Gavin Bade and Jesse Newman Wall Street Journal
Date Posted:

The White House is quietly exempting products that the US doesn’t domestically produce from reciprocal tariffs. The WSJ reports that the shift in tariffs reflects a “desire to hedge its bets should the court strike down its broad levies.”

Is the US shifting away from broad tariffs toward sector-specific ones?

Core argument: President Trump has exempted dozens of products from his reciprocal tariffs and offered to carve out hundreds more, from farm products to airplane parts, for countries that strike trade deals with the U.S.

President Trump in recent weeks has exempted dozens of products from his so-called reciprocal tariffs and offered to carve out hundreds more goods from farm products to airplane parts when countries strike trade deals with the U.S. The offer to exempt more products from tariffs reflects a growing sentiment among administration officials that the U.S. should lower levies on goods that it doesn’t domestically produce, say people familiar with administration planning. The shift on the reciprocal tariffs reflects the Trump team’s desire to hedge its bets should the court strike down its broad levies, according to people familiar with the administration’s thinking. At the same time, Trump’s team is expanding its use of tariffs based on more established legal authority: Section 232 of the Trade Expansion Act of 1962. Trump has already deployed that law to underpin tariffs on metals and automobiles, and this month announced a new tranche of duties aimed at heavy trucks, pharmaceuticals and furniture.

Takeaways by Macro Roundup® AI

  1. President Trump has exempted dozens of products from his reciprocal tariffs and offered to carve out hundreds more, from farm products to airplane parts, for countries that strike trade deals with the U.S.
  2. The expanded exemption offer reflects growing sentiment among administration officials that the U.S. should lower levies on goods it does not domestically produce, according to people familiar with administration planning.
  3. Trump's team is expanding its use of tariffs based on Section 232 of the Trade Expansion Act of 1962, already used for metals and automobiles and now extended to heavy trucks, pharmaceuticals and furniture.

Related Articles:

  • Tariffs Are Generating Meaningful New Revenue — New U.S. tariffs are estimated to generate $1.3tn in net new revenue through the end of the current presidential term and $2.8tn through 2034 before economic effects, about $600bn more than previously enacted tariffs. If a court ruling striking down some tariffs is upheld, the remainder could raise as little as $800bn through 2034.
  • Short-Run Effects of 2025 Tariffs So Far — The authors estimate US tariffs raised $146bn in net customs duty revenues over the first eight months of 2025, with roughly $88bn of that attributable to new 2025 tariffs. August's new-tariff revenue of about $23bn ran roughly a fifth below the $29bn per month projected from statutory rates.
  • 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.

AI Summary. Labor demand growth may be too weak to keep pace with even modest labor supply growth: the labor market is somewhat weaker than before the pandemic, job growth has turned negative outside healthcare, and firms are focused on using AI to cut labor costs. Economists estimate most employment losses in routine manual occupations since the 1970s occurred during recessions.

David Mericle and Pierfrancesco Mei Goldman Sachs
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Weak labor demand is not keeping pace with “modest” labor supply growth. Outside of the healthcare sector, job growth is now net negative. Mericle and Mei note that the impact of AI on the labor market may “not become apparent until a recession hits.”

Is labor demand too weak to absorb modest labor supply growth?

Core argument: Economists Nir Jaimovich and Henry Siu estimate that since the 1970s most employment losses in routine manual occupations have occurred during recessions, with about half of the total decline in their employment share taking place in recessions.

The key question is whether labor demand growth is and might remain a bit too weak to keep up with even modest labor supply growth. There are already some concerning signs of this. The labor market is now somewhat weaker than it was just before the pandemic, job growth has turned negative on net in recent months outside of the healthcare industry, and company management teams are increasingly focused on using AI to reduce their labor costs, a potentially long-lasting headwind to labor demand. History also suggests that the full consequences of AI for the labor market might not become apparent until a recession hits. Economists Nir Jaimovich and Henry Siu have estimated that since the 1970s, most employment losses in routine manual occupations—those particularly exposed to the technological innovations of the past half-century—have come during recessions. Around half of the total decline in the employment share of these occupations has taken place in recessions.

Takeaways by Macro Roundup® AI

  1. Economists Nir Jaimovich and Henry Siu estimate that since the 1970s most employment losses in routine manual occupations have occurred during recessions, with about half of the total decline in their employment share taking place in recessions.
  2. Job growth has turned negative on net in recent months outside of the healthcare industry, and the labor market is somewhat weaker than it was just before the pandemic.
  3. Company management teams are increasingly focused on using AI to reduce labor costs, a potentially long-lasting headwind to labor demand whose full consequences for the labor market might not become apparent until a recession hits.

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  • Canaries in the Coal Mine? Six Facts about the Recent Employment Effects of Artificial Intelligence — Using payroll records covering millions of US workers, the authors find employment for workers aged 22–25 in occupations most exposed to artificial intelligence, such as software developers and customer service representatives, declined 6%, while employment for older workers in those occupations rose 6–9%. Employment in less-exposed occupations grew comparably across age groups.
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AI Summary. Gold fell as much as 6.3% after reaching a record $4,381.52 an ounce, its largest drop in 12 years, following a weeks-long rally to successive highs. Contributing factors included positive US-China trade talks, a stronger dollar, overstretched technical indicators, and the end of a seasonal buying period in India.

Jack Ryan and Yvonne Yue Li Bloomberg
Date Posted:

Gold fell by as much as 6.3% (5.2% as of now) today after hitting a record high on Monday. Year-to-date, gold has risen 55%.

Why did gold prices drop sharply after hitting a record high?

Core argument: Gold fell by as much as 6.3%, its largest drop in 12 years, a day after reaching a record high of $4,381.52 an ounce.

Gold slid the most in 12 years after a weeks-long furious rally that sent the precious metal to successive record highs. Bullion prices fell by as much as 6.3% after hitting a fresh peak of $4,381.52 an ounce the previous day. A confluence of factors dragged down the precious metal including positive trade talks between China and the US, a stronger dollar, overstretched technicals, and uncertainty on investor positioning due to the government shutdown and the end of a seasonal buying spree in India.

Takeaways by Macro Roundup® AI

  1. Gold fell by as much as 6.3%, its largest drop in 12 years, a day after reaching a record high of $4,381.52 an ounce.
  2. The gold selloff followed a weeks-long rally that had carried bullion to successive record highs.
  3. Factors weighing on gold included positive US-China trade talks, a stronger dollar, overstretched technicals, uncertainty on investor positioning tied to the government shutdown, and the end of a seasonal buying spree in India.

Related Articles:

  • Gold Prices Top $4,000 for First Time — Gold topped $4,000 a troy ounce for the first time, with futures rising more than 50% in a year — a bigger run-up than during the pandemic or the 2007-09 recession, and the largest since the inflationary shock of 1979. Central-bank buying has helped gold surpass the euro as the world's second-largest reserve asset.
  • De-Dollarization? Diversification? Exploring Central Bank Gold Purchases and the Dollar’s Role in International Reserves — 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.

AI Summary. Chinese banks have shifted their trade financing toward the renminbi, which now accounts for 72% of the roughly $250bn of Chinese trade credit extended since 2017, up from 17% of about $150bn during 2017-2021. The dollar share of Chinese trade credit is falling, and dollar trade credit provision may be negative.

Martin Lynge Rasmussen Money: Inside and Out
Date Posted:
Is Database:
Database

Between 2017 and 2021, only 17% of $150B of Chinese trade financing was denominated in RMB. Since 2022, $100B in trade financing has been RMB denominated, opening up an avenue for China to de-dollarize.

Is trade financing shifting from dollars to renminbi?

Core argument: Renminbi accounts for 72% of the cumulative $250bn of Chinese trade credit extended since 2017, up from 17% of the roughly $150bn provided during 2017–2021.

Chinese banks have begun to provide substantial amounts of renminbi-denominated trade financing in the last 1-2 years. The current scale is not unusual per se. What is notable is that the financing now seems to be heavily renminbi-denominated. Chinese trade credit added up to around $150bn during 2017-2021, and only 17% was in RMB. However, since 2022, the composition has changed, and renminbi has grown so quickly that it now makes up 72% of the cumulative $250bn extended since 2017. In other words, the Dollar share of Chinese trade credit is dropping sharply. In fact, the provision of USD trade credit may be negative.

Takeaways by Macro Roundup® AI

  1. Renminbi accounts for 72% of the cumulative $250bn of Chinese trade credit extended since 2017, up from 17% of the roughly $150bn provided during 2017–2021.
  2. Chinese banks have begun providing substantial renminbi-denominated trade financing, with the overall scale not unusual but the currency composition shifting heavily toward renminbi since 2022.
  3. The dollar share of Chinese trade credit is dropping sharply, and the provision of US dollar trade credit may be negative.

Related Articles:

  • China FX Diversification and the Dollar — The dollar's share of China's cross-border transfers has fallen from 80-85% to 40-45% over roughly 15 years, with the decline driven mainly by higher renminbi flows, and the renminbi's share of global trade financing has risen from about 2% to over 7%. China's foreign exchange reserve composition and onshore trading remain dollar-dominated.
  • China Emerges From Trade Chaos With Record Exports, Surplus — China posted a record half-year trade surplus of about $586bn, with exports up 5.8% year-over-year to $325bn and imports up 1.1%. Shipments to the US fell 16.1% from a year earlier, while exports to the 10 Southeast Asian nations in the Asean group rose 17%.
  • Why China Should Revalue the Renminbi—And Why It Can’t Easily Do So — A stronger renminbi would erode Chinese manufacturers' competitiveness at a time when Beijing depends on them for employment and output, because that competitiveness and China's weak household consumption stem from the same transfers. In the short term a rising currency could cut export demand faster than domestic demand rises, risking job losses, falling industrial profits, and financial stress.