I spent 16, SIXTEEN years fighting this crap.

I can’t believe it 😭

Stylized model simulations in a New Keynesian framework also suggest the final incidence of tariffs falls mostly on Americans:
bsky.app/profile/moty...

cc @monacelt.bsky.social @aauclert.bsky.social @kalemli-ozcan.bsky.social @baldwinre.bsky.social @pkrugman.bsky.social @ivanwerning.bsky.social @jzettelmeyer.bsky.social @zsoltdarvas.bsky.social @martinsandbu.ft.com

The Macroeconomic Effects of US Tariff Hikes This paper assesses the macroeconomic consequences of US tariff hikes on the EU and US as well as on global trade flows, based on quantitative simulations by the European Commission's multi-region New...

The paper goes through a battery of alternative scenarios and sensitivity tests:
* for US monetary and fiscal policy,
* tariff persistence,
* international trade invoicing (DCP vs PCP),
* trade elasticities,
* retaliations and
* risk premium shocks.
Check it out! 12/12

App. B2 lays out a simpler NK model, looking at the flex-price equilib. to derive an AS-AD framework for permanent tariffs. It highlights the diff bw complete mkts (@monacelt.bsky.social , 2025) and incomplete mkts (Jeanne&Son, 2024): tariffs shift AD out but also hurt AS, lowering GDP 11/12

US tariffs on non-EU countries generate indirect spillovers to the EU via trade diversion, slightly deepening the short-term economic losses in Europe (via lower competitiveness vis-a-vis 3rd countries), but contributing positively later on (due to market share within the US) 10/12

Global trade patters are reshuffled, as the fall in US-bound exports is partly compensated by European exporters gaining market share in third countries at the expense of less competitive American firms. 9/12

EU GDP takes a moderate hit, driven mainly by lower exports to the US.

A weaker (more competitive) European ToT softens the fall in EU exports, and reins in import demand...

...but the ToT-loss also erodes the purchasing power of EU incomes, weighing on consumption. 8/12

But with the extra tariff revenues eventually handed back to households as tax cuts or transfers, the US ToT-gain represents an increase the purchasing power of domestic incomes.

Despite this, US real GDI (real GDP + ToTgain) would still fall as production is hit by tariffs 7/12

Although tariff revenues generate fiscal space for the US gov, only 1/4 of the burden falls on foreigners in the form of a US terms-of-trade gain.

The rest falls on US firms and households, who face lower real incomes through higher consumer prices or reduced profit margins 6/12

Monetary tightening in response to inflationary pressures weighs on domestic demand for investment and consumption, an important transmission channel (as also argued by @monacelt.bsky.social ).

As exports fall along with imports, US trade deficits are reduced only temporarily. 5/12

Excess demand for domestic products puts a strain on the economy's resources, leading to a terms-of-trade appreciation, which offsets a quarter of the direct effect of tariffs on after-tax relative prices, and crowds out exports by eroding the competitiveness of US firms. 4/12

Rather than aiding domestic production, tariff hikes weaken the US economy:

while tariffs shift demand from imports towards US-produced goods (expenditure switching)...

...they also act as an adverse supply shock by making imported inputs costlier. 3/12

With the tariffs the US government hopes to achieve a range of policy goals:
* boosting domestic manufacturing production,
* reducing the US trade deficit,
* and raising budgetary revenues which it claims would be ”paid by foreigners".

This paper looks at these in turn. 2/12

🚨New Discussion Paper🚨 about the macroeconomic consequences of US tariff hikes, based on quantitative simulations by the European Commission's multi-region New Keynesian DSGE model, QUEST. Thread 👇1/12

economy-finance.ec.europa.eu/document/dow...

Proportionally, the estimated 100-200k Pride marchers in Budapest today would correspond to something approaching 1m in London or New York. And this in a country that has now spent 15 years under illiberal, authoritarian rule.

What a symbol of hope.

Trump's tariffs are designed for maximum damage—to America President Donald Trump touted his bewildering array of "Liberation Day" import tariffs as carefully calibrated to offset trade partners' tariff, nontariff, and currency barriers to US exports. However...

Trump's tariffs are designed for maximum damage—to America This is not a both sides have a point situation.
Maury Obstfeld @piie.com speaking truth to power.
www.piie.com/blogs/realti...

So these "reciprocal tariffs" are cumulative on the 20% China already got, but not on sectoral tariffs on cars and steel&aluminium?

Also, what about Russia?

Are we to understand these "reciprocal tariffs" as coming *in addition to* already announced "other tariffs" (e.g. 20% on China, or 25% on steel&aluminim and 25% on cars)? Or the highest rate of overlapping tariff regimes applies?

Reciprocity and discrimination: When are tariffs useful remedies? The Trump administration has marked April 2 for its next big tariff announcement, one centered on countering unfair trade practices abroad and imposing reciprocal trade protection. The administration ...

🧵(1/7) My new blog @piie.com is out, on “reciprocity”, a deeply flawed motive for tariffs. Why?

For trade barriers, the rationale is wrong-headed.

For tax policy differences, the rationale is nonsensical; the tax policies in question create no US disadvantage.

www.piie.com/blogs/realti...

We Were the Rule-of-Law Generation. Emphasis on ‘Were.’ Watching the United States’ descent into an autocratic mafia state is an eerie experience, having spent my entire adult life in Hungary’s…

Watching the US slide into autocracy feels eerily familiar — like re-living the early years of Orbánism (only more intense, honestly).

I wrote down some reflections from that period. It won’t make you feel better. But it might make the stakes clearer.

medium.com/@palma.polya...

Hadja Lahbib, the EU commissioner for equality, suggested the new law contravened the values of the 27-nation bloc, posting: “Everyone should be able to be who they are, live & love freely. The right to gather peacefully is a fundamental right to be championed across the European Union. We stand with the LGBTQI community – in Hungary & in all member states.

Yesterday, an EU member state banned Pride events 🏳️‍🌈, threatening to use facial recognition & 500€ fines to target attendees.

We need more than deep concerns.

We need EU leaders across the continent to book their tickets to Budapest & join us on June 28

www.theguardian.com/world/2025/m...

Re: today's news about the German fiscal bazooka

Back in 2019, I argued that DE austerity & underinvestment would only change if their external enablers disappeared. These policies were always self-harming, but buoyant US & Chinese demand kept the costs hidden. Not anymore.

doi.org/10.1080/1356...

Viktor Orbán says he’ll ban Budapest Pride. We won’t let that happen. This year, we’ll march in greater numbers than ever 🏳️‍🌈

My message to European leaders: stand with us. Announce that you’re coming to Budapest.

#SeeYouAtBudapestPride

Read the op-ed 🗞️ euobserver.com/eu-political...

How Germany’s Fiscal Orthodoxy Toppled Its Government and Imperils Its Future | Review of Democracy On November 6, 2024, Chancellor Olaf Scholz dismissed Finance Minister Christian Lindner, ending Germany’s “traffic light” coalition in dramatic fashion. This wasn’t just a matter of personal differen...

My postmortem on the Ampel🚦goverment — toppled by the debt brake, the German economy’s suicide pact

Have a read👇
tinyurl.com/mr4b7n9h

@revdem2020.bsky.social

(Of course, EU-level central budget would help the single currency as well, to more easily achieve the desired fiscal stance when monetary policy is constrained by the ZLB.)

Nice recap of EUI event. It is not so much monetary integration that necessitates fiscal integration in Europe but it is rather the single market (integration of the real economy) that necessitates both: avoiding competitive devaluations as well as a subsidy race to preserve the level playing field.