Here is what our network liked (selection): Tariffs and international trade, cryptocurrencies, trust in central banks, and much more…
The erratic tariff policy and dramatic increases in tariff rates by Donald Trump create numerous challenges for firms and households and are associated with a high degree of volatility in financial markets. According to Marina Azzimonti, Zach Edwards, Sonya Ravindranath Waddell, and Acacia Wyckoff from the Federal Reserve Bank of Richmond, the average effective tariff rate of the United States is now 27.5% (although some recently announced exemptions are likely not yet included in this analysis).
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There are a lot of great resources to help understand tariff and trade policies.
In German speaking countries, the Kiel Trade and Tariffs Monitor is highly recommended.
A group of economists at the Federal Reserve Bank of Richmond (primarily Marina Azzimonti, Zach Edwards, Sonya Ravindranath Waddell, and Acacia Wyckoff) regularly publish tariff updates.
The Budget Lab at Yale also frequently publishes its State of U.S. Tariffs.
Similarly, the Tax Foundation produces valuable analyses on the budgetary and economic effects of the tariffs:
A number of other influential think tanks publish high-quality articles and podcasts, or organize interesting events. For instance, the Peterson Institute for International Economics, Cato, or the Brookings Institution.
Other noteworthy think tanks and research institutes also conduct valuable analyses. While the tariff policy is erratic and uncertain, there is no shortage of high-quality reports and podcasts.
One main goal of Donald Trump (at least, this goal is frequently mentioned by him publicly) is the reduction of the US deficit in goods trade. He does not seem to focus as much on trade in services, at least in his public statements. It is true that the US has run a large deficit in trade in goods in recent years (Figure 1). An interesting question that is sometimes overlooked is how a potential reduction of the US deficit in goods trade (if it is successful, which is far from guaranteed) affects surplus countries. Simply put, where will countries that currently run a surplus in goods trade export their products in the future? Or will they reduce their surplus?
Figure 1: Trade balance in goods for selected countries
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This looks like a must-read!
"Convergence? Thoughts about the evolution of macroeconomics over the last 40 years" by Olivier Blanchard
"The Global Financial Crisis and the COVID-19 crisis all led very quickly to abundant new research; the research may not have contributed much to policy in real time, but it has led to a better understanding of financial markets and of supply disruptions, which will be useful for the future. The new protectionist policies of the Trump administration are likely to have the same effect, leading to a better understanding of tariffs and other protectionist measures on activity."
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Super interesting!
"Capital in Banking: The Role of Capital in Banking in the 19th and 20th Century: The United Kingdom, the United States and Switzerland" by Simon Amrein
"Capital in Banking traces the role of capital in US, British, and Swiss banking from the nineteenth to the twenty-first century."
"it emphasises the origins of the risk-weighted assets approach for measuring capital adequacy and explains how the 2007/2008 crisis led to a renaissance of unweighted capital ratios"
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Very valuable!
"Cryptocurrencies and decentralised finance: functions and financial stability implications" by Matteo Aquilina, Giulio Cornelli, Jon Frost and Leonardo Gambacorta
"Cryptocurrencies and decentralised finance (DeFi) aim to replicate many of the economic functions of traditional finance (TradFi), but their distinctive features introduce new financial stability risks. We analyse these features, and examine key developments, such as smart contracts, decentralised exchanges (DEXs), stablecoins and new forms of central bank money. Our findings suggest that while the underlying economic drivers are not different than in TradFi, DeFi poses significant challenges, including new forms of information asymmetries, market inefficiencies and the risk of cryptoisation in emerging markets."
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Super interesting!
"Partisan Trust in the Federal Reserve" by Carola Binder, Cody Couture & Abhiprerna Smit
"This paper examines partisanship in public perceptions of the Federal Reserve. In all years from 2001 through 2023, trust in the Federal Reserve was highest for respondents of the same party as the President."
"We conducted a new survey-based information experiment before and after the Presidential inauguration in 2025, and found a changed pattern: Republicans continued to have lower trust in the Fed than did Democrats, even after a Republican President was elected and took office. Yet, Republicans had much lower inflation expectations than Democrats."
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Food for thought!
"How Tariffs Affect Trade Deficits" by Ivan Werning and Arnaud Costinot (work in progress)
"we speculate that the effects of tariffs on the trade balance are relatively modest, at least for tariffs below 50%. We conjecture that large tariffs are required to affect trade imbalances significantly"
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Worth reading very carefully!
"Trade Wars Are Easy to Lose" by Adam S. Posen
"To the degree that the bilateral trade balance predicts which side will “win” in a trade war, the advantage lies with the surplus economy, not the deficit one. China, the surplus country, is giving up sales, which is solely money; the United States, the deficit country, is giving up goods and services it does not produce competitively or at all at home."
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Thought-provoking!
"Inflation Targeting and the Legacy of High Inflation" by Luis Ignacio Jácome, Nicolas E Magud, Samuel Pienknagura, and Martin Uribe.
"We show that achieving low inflation (hitting the target) requires more aggressive monetary policy, and is costlier from an output point of view, when individuals’ past inflationary experiences shape their inflation expectation formation."
"We also point to the existence of a credibility puzzle, whereby the strength of a central bank’s monetary policy response to deviations from the inflation target remains broadly unchanged even as central banks gain credibility over time. Put differently, a country’s inflationary past casts a long and persistent shadow on central banks."
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What else could be more relevant now?
"Global Networks, Monetary Policy and Trade" by Sebnem Kalemli-Ozcan, Can Soylu, and Muhammed A. Yıldırım
"We develop a novel framework to study the interaction between monetary policy and trade."
"Tariffs act simultaneously as demand and supply shocks, leading to endogenous fragmentation through changes in trade and production network linkages. We show that the net impact of tariffs on domestic inflation, output, employment, and the dollar depends on the endogenous monetary policy response in both the tariff-imposing and tariff-exposed countries, within a global general equilibrium framework."
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A great short overview on tariffs and trade, highly recommended!
"In a world of trade tensions, what do tariffs really do?" by Ralph Ossa (WTO chief economist)
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Some economists are really fast!
"Making America Great Again? The Economic Impacts of Liberation Day Tariffs" by Anna Ignatenko, Ahmad Lashkaripour, Luca Macedoni, and Ina Simonovska.
"We analyze the long-term economic effects of these tariffs, finding that while they may improve U.S.’s terms of trade if trading partners do not retaliate, any welfare gains vanish under reciprocal retaliation."
"Although the tariffs do succeed in reducing the U.S. trade deficit, the resulting deadweight losses underscore the inefficiency of using protectionist trade policy as a tool for deficit reduction."