1/6
According to the WSJ, after a few years in which the earnings of the poor rose faster than the earnings of the rich, in 2025 the earnings of the rich have risen faster. In theory this should have resulted in a lower US trade deficit.
wsj.com/economy/us-eco… 2/6
That's because the rich consume less of their income than the poor, and so a shift in the relative income share from poor to rich should have reduced overall US consumption and increased overall US savings, which in turn should have reduced the US trade deficit.

1/6
SCMP: "President Xi Jinping has called for more efforts to develop a unified domestic market, arguing that it will be crucial to helping China secure an edge in international competition and meet its development goals."
scmp.com/economy/china-… 2/6
In a hyperglobalized world, a country gets to choose between economic sovereignty and global integration. The more it chooses to integrate into the global trade and capital system, the less control it exerts over its domestic economy.

rodrik.typepad.com/dani_rodriks_w…

1/7
In August, both growth in industrial output and growth in retail sales came in well below expectations, with the former up 5.2% and the latter up 3.4% (compared to 5.7% and 3.7%, respectively, in the previous month).
english.news.cn/20250915/7a106… 2/7
As always, the key point is that for all the talk of rebalancing, the proxy for output growth continues to outpace the proxy for consumption growth by quite a large margin.

Meaningful rebalancing requires that consumption outpace GDP growth by roughly two percentage points.

1/8
Bloomberg: "China urged Mexico to “think twice” before levying tariffs, a warning that could signal Beijing’s willingness to retaliate over a move it sees as giving into demands from the US."
bloomberg.com/news/articles/… 2/8
Mexico announced plans earlier this week to impose duties of as much as 50% on cars and other products made by China and several Asian exporters.

These are the kinds of stories I think we'll see more of in the next year or two.

1/14
Barry Eichengreen warns, correctly, that "The dollar’s international primacy isn’t eternal. To be sustained, it has to be actively fostered and preserved."

But why sustain the dollar’s international primacy? Is this merely a modern monetary fetish?
wsj.com/finance/curren… 2/14
While the primacy of the dollar is certainly good for bankers, financiers, and very wealthy owners of movable capital, what's much less obvious is the extent to which it benefits or harms American workers, manufacturers and middle class households.

1/10
Interesting new IMF paper on the extent of industrial policy subsidies to Chinese manufacturers and SOEs (to the extent information is available) and their impact on productivity.
imf.org/en/Publication… 2/10
It measures national-level cash subsidies, tax benefits, subsidized credit, and subsidized land, which collectively amount, it says, to a high 4% of GDP. The authors note that other subsidies exist, including sub-national subsidies, but these are harder to measure.

1/5
Is the expansion in robotaxis driven by the needs of the economy or by policy decisions? This is not a topic on which I have much information or knowledge, but last week I told a Chinese friend of mine (a well-known economist) that I had heard that as many as 30% of the...

https://twitter.com/YuanTalks/status/1965684723273060364

2/5
cars in Beijing streets were Didi drivers (China's Uber). This struck me as an incredibly high number.

He told me that he thought in fact 30% might actually be a low estimate. He also told me that he believed Didi drivers aren't able to get more than one fare an hour.

1/7
Although August CPI deflation widened year on year to -0.4%, compared to 0.0% in July and well above expectations of -0.2%, leading many analysts to worry that deflation in China is accelerating, I think prices actually did fine.
en.people.cn/n3/2025/0910/c… 2/7
CPI was driven down mostly by a 4.3% decline in food prices, with core inflation up 0.9%, its sixth straight month of higher year-on-year prices. More importantly, in my opinion, month-on-month CPI prices were flat in August, after rising 0.4% in July.

1/7
NYT: "Through August, China exported $141 billion to Africa, while importing $81 billion. The widening trade imbalance with Africa stems from surging exports of Chinese-made batteries, solar panels, electric vehicles and industrial equipment."
nytimes.com/2025/09/08/bus… 2/7
"The swell in exports to Africa," it continues, "along with record volumes of goods sold to Southeast Asia and Latin America, underscores the resilience of Chinese manufacturers in finding new markets for the products they continue to churn out in enormous quantities."

1/7
For all the talk of rebalancing domestic demand in China, Chinese exports continue to climb much faster than imports in 2025. In the first seven months of 2025, exports were up 6.9% in RMB terms, while imports were up 1.2%.
english.news.cn/20250908/e41cd… 2/7
For just the month of August, exports were up 4.4% year on year to $321.8 billion while imports were up 1.3% to $219.5 billion, leaving China with a trade surplus of $102.3 billion, its fifth trade surplus this month of over $100 billion, with five out of...

1/6
I often make fun of the sheer hysteria that tariffs generate amount academic economists, but Navarro's comment is just as hysterical, even if in the opposite way. Tariffs are not tax cuts.

https://twitter.com/SpencerHakimian/status/1964373522706477291

2/6
They are, like many other policies, a mechanism for transferring income from one sector of the economy to another, in this case from households to producers. In that sense they work like a currency devaluation, by taxing imports and subsidizing exports.

1/8
Rather than treat Mexico and Canada as trade rivals, Washington should recognize that both are substantial deficit countries that, by helping to absorb global trade and savings imbalances, actually reduce trade pressures on the US.
wsj.com/economy/trade/… 2/8
The deep, flexible, and well-governed American financial markets, along with its completely open capital account, have given the US the role of "absorber of last resort" of global savings imbalances, which is just another way of saying "consumer of last resort".

1/10
Ngozi Okonjo-Iweala is concerned mainly about countries following the WTO rulebook, and as head of the WTO, perhaps this makes sense, but it also suggests why the WTO has become largely irrelevant to global trade.
ft.com/content/344ef0… 2/10
For her, the problem has emerged mainly "in the past six months", in the form of tariffs from the US and, increasingly, from other countries as they struggle to absorb huge, persistent trade surpluses and China's rapidly expanding share of global manufacturing.

1/4
I hate to disagree with Albert Einstein, but technological progress does not lead to unemployment. To the extent that it causes productivity to rise, what really matters is whether or not the resulting rise in productivity is matched by a commensurate rise in wages.

https://twitter.com/RelearningEcon/status/1963133813233688590

2/4
If it is, rather than a rise in unemployment we're more likely to see a shift in employment from the sector that benefitted from technological progress to other sectors. That's because as the real cost of the former's products declines, households will spend more on the latter.

1/9
Good Keith Bradsher article on strengths and weaknesses of China's approach to EV manufacturing. As the summary has it: "Beijing has run out of patience with companies slashing prices, and is urging restraint. But fierce competition is also producing a surge of innovation."
nytimes.com/2025/09/02/bus… 2/9
As the article notes, China bears worry about the huge losses in the industry, even after substantial direct and indirect subsidies that come at the expense of domestic demand. China bulls focus instead on the rapid technological advances that characterize the industry.

1/16
While Bloomberg is right to say that "a less hegemonic dollar would [adversely] affect America’s geopolitical prowess," it is wrong to assume that it would also adversely affect the US economy, or that it would raise US interest rates.
bloomberg.com/news/articles/… 2/16
There is no evidence at all that a country's economy must benefit from the wide use of its currency. To the extent the global use of a currency primarily reflects the extent to which other countries want to acquire local assets in exchange, its only obvious economic impact...

1/11
Caixin: "A wave of minimum-wage increases is sweeping across China, with major economic hubs like Beijing and regions such as Hunan province announcing fresh hikes as part of a national push to lift incomes for the country’s lowest-paid workers."
caixinglobal.com/2025-08-28/chi… 2/11
This is certainly good news. If raising minimum wages is done in a meaningful way, it will easily be the most effective of all the various ways in which Beijing has tried—without much success so far—to raise the household share of GDP and, with it, the consumption share.

1/15
This interesting essay by Oliver Kim on Chinese underconsumption was set off by a recent C40 Policy brief that argues, in the words of its title, that "China's consumption is not nearly as low as it appears."

global-developments.org/p/does-china-u… 2/15
The C40 essay illustrates some of the confusion that surrounds the issue of Chinese underconsumption. It argues that the Chinese don't underconsume because when corrected for prices or for income, Chinese consumption is more or less "normal".
pekingnology.com/p/chinas-consu…

1/9
FT: "investors worldwide were already nervous about owning too many US dollar investments. This news only energised a growing conviction by them to seek other places to put their money, including the emerging markets."
ft.com/content/85e589… 2/9
I am not sure this is actually happening—it's not what the BoP data suggest—but if it were, it would be a very good thing. Capital should not flow from fast-growing, capital-poor economies to slower-growing capital-rich economies. It should flow in the opposite direction.

1/15
Very good Bloomberg piece on Beijing’s recent push to curb overcapacity through an “anti-involution” campaign. It is important to remember in this context that while excess capacity has been...
bloomberg.com/news/articles/… 2/15
a problem in China for at least 10-15 years, it's latest manifestation was a direct consequence of the collapse of a property bubble which was itself set off by policies Beijing implemented in order to protect the economy from an earlier case of weak demand and deflation.

1/7
According to Caixin, "China’s rental housing market is facing an unusual squeeze this summer: listings are soaring while rents keep falling, underscoring a supply glut that landlords are struggling to absorb."
caixinglobal.com/2025-08-22/chi… 2/7
This is why I've often argued that one of the most common proposals to shore up property prices—getting local governments to buy up empty apartments and funding these purchases offering out cheap rentals—would not help stabilize property prices.