VoxTalks Economics

The 29th Geneva Report on the World Economy examines three pressures on the international financial system at once: global imbalances, the status of the dollar, and the stability of bond markets. Two of its authors, Valentina Bruno (American University, CEPR) and Cédric Tille (Geneva Graduate Institute, CEPR), tell Tim Phillips why stocks, the dollar and US Treasuries all fell on Liberation Day in April 2025, why that could happen again, and what we should do about it. 
So is this a rupture, or a transition in the world's financial system?
The research behind this episode:
Bruno, Valentina, Steven B. Kamin, Angel Ubide, and Cedric Tille. 2026. "Changing Structure and Challenges of the International Financial System: Imbalances, Currencies, and Financial Stability." Geneva Reports on the World Economy 29. Geneva: International Center for Monetary and Banking Studies; Paris and London: CEPR Press. Free to download.
To cite this episode:
Phillips, Tim, Valentina Bruno, and Ceric Tille. 2026. "The challenges to the international financial system”. VoxTalks Economics (podcast).

About the guests

Valentina Bruno is Professor of Finance at the Kogod School of Business, American University, where she holds the Arlene R. and Robert P. Kogod Eminent Scholar Chair in Finance. She is a Research Fellow of the Centre for Economic Policy Research in the Banking and Corporate Finance programme. Her research spans macroeconomics and finance, with recent work on how the US dollar transmits global financial conditions. She has worked at the World Bank and been a visiting scholar at the Federal Reserve Board.
Cédric Tille is Professor of International Economics at the Geneva Graduate Institute, where he heads the Bilateral Assistance and Capacity Building for Central Banks programme. He is a Research Fellow of CEPR in the International Macroeconomics and Finance programme. His research spans financial globalisation, the dynamics of countries' external assets and liabilities, and the currencies used to invoice international trade. He sat on the Bank Council of the Swiss National Bank from 2011 to 2023 and previously worked for nine years at the Federal Reserve Bank of New York.
Research cited in this episode

The triple decline of April 2025. After the US announced sweeping tariffs on 2 April 2025, which President Trump called "Liberation Day", US stocks, Treasuries and the dollar fell together. Bruno argues that foreign investors did not sell their US assets; they bought protection against a falling dollar, and that hedging pushed the currency down. Much of their US equity exposure remains unhedged, so a new shock that starts in the US could trigger the same response.
Global imbalances. Large and persistent current account surpluses in some countries, mirrored by deficits in others. Imbalances were a major policy topic before 2008, faded after the global financial crisis, and are now back. Tille argues that the headline measures have risen only modestly; the concern is China, whose trade surplus is the largest ever recorded as a share of world GDP.
The China shock. Autor, David H., David Dorn, and Gordon H. Hanson. 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States." American Economic Review 103 (6): 2121-2168. Cheap imports from China benefited US consumers as a whole, but the job losses were concentrated in particular industries and places, furniture making among them. Tille uses it to explain why Germany's car workers see the current wave of Chinese competition differently from German consumers.
The coordinated policy package. International Monetary Fund. 2026. "2026 External Sector Report: Amid Rising Imbalances, the Case for Rebalancing." The standard prescription is US fiscal consolidation, more consumption in China and more investment in Europe. The report cites IMF estimates that a coordinated package would narrow global imbalances by 0.5% of world GDP over the medium term, compared with a widening of 0.4% under current trends. Nearly all the narrowing comes from China.
The renminbi debate. Brad Setser of the Council on Foreign Relations argues that China holds its exchange rate down and that a stronger renminbi is part of the solution. Tille notes that other economists treat the exchange rate as a sideshow to China's high savings and weak domestic demand.
The basis trade. Pension funds, insurers and asset managers often prefer to hold Treasury exposure through futures. Hedge funds take the other side; they sell the futures, buy the bonds and earn the small gap between the two prices, funded with overnight borrowing. In calm markets the trade links the futures and cash markets and helps the Treasury sell its debt. When lenders pull back, hedge funds must sell bonds at the same moment. The report cites estimates that Cayman Islands hedge funds alone held about $1.8 trillion of Treasuries.
March 2020 and the UK gilt crisis. In March 2020, the Covid shock set off a scramble for dollars in which even Treasuries were sold, and the Federal Reserve bought Treasuries to restore order. In September 2022, UK pension funds using liability-driven investment strategies had to sell gilts as yields rose, which pushed yields higher still, until the Bank of England stepped in. Bruno cites both as examples of safe assets at the centre of stress, where falling prices force more sales.
The 1970s and 2008. Bruno compares today with two earlier periods when imbalances, the dollar and bond markets came under pressure together: the collapse of the Bretton Woods system of fixed exchange rates in the early 1970s, when inflation also eroded bond values, and the years before 2008, when Asian savings and European bank lending flowed into US assets. In 2008 the stress sat in the banks. Today it sits with pension funds, insurers and hedge funds.
Exorbitant privilege. The phrase, usually attributed to Valéry Giscard d'Estaing as French finance minister in the 1960s, describes the advantage the US gets from issuing the world's main reserve asset; foreigners accept a low return to hold it. Tille points out that the US once ran a trade deficit while earning more on its foreign assets than it paid on its liabilities. That surplus on primary income has now gone.
The market-based trilemma. The old trilemma of international finance, associated with Robert Mundell and Marcus Fleming, says a country cannot have free capital flows, a fixed exchange rate and an independent monetary policy all at once. The report proposes a new one. Governments want to issue ever more debt, regulators want tight limits on bank balance sheets, and investors expect bond markets to work smoothly every day. You can have any two, but not all three all the time.
"Our currency, but your problem." John Connally, US Treasury Secretary, told European counterparts in 1971 that "the dollar is our currency, but it's your problem." The report updates the line; the dollar is no longer just a currency but the operating system of global finance.
Rupture or transition? The report opens with a remark by Mark Carney, Prime Minister of Canada, at the 2026 World Economic Forum, that the world is "in the midst of a rupture, not a transition." The authors test whether the same is true of the international financial system.
More VoxTalks Economics episodes

The Dollar Anchor Is Slipping. Tarek Hassan explains why the dollar became the world's safe haven and how tariffs weaken it.
Addressing Global Imbalances. Gita Gopinath and Philip Lane on why today's imbalances put more risk on government debt and non-bank lenders.
Stablecoins and Global Imbalances. Gilles Moec on how dollar stablecoins could pull global savings into US Treasury bills.
Related reading on VoxEU.org

Changing structure and challenges of the international financial system: Imbalances, currencies, and financial stability, a VoxEU column in which the four authors summarise the report.
Geopolitical tensions and international financial fragmentation: The 28th Geneva Report on the World Economy, a VoxEU column on how geopolitical rivalry is pushing global finance to split along political lines.

Who gets the kids? Courts aim to decide custody in the child's best interests, but nobody has had the data to test how well those decisions work.
Gordon Dahl (UC San Diego, CEPR), Costas Meghir (Yale, CEPR) and seven co-authors built the data themselves. They collected more than 56,000 Swedish custody rulings, scanning paper files by hand where no digital copy existed, and linked them to records of parents' earnings, prescriptions and children's school tests. 
It seems Swedish judges do not agree on how often to award joint custody. Some award it in about 60% of cases; others in about 20%. But that decision makes a huge difference to the lives, and happiness, of both parents and children. They tell Tim Phillips whether joint or sole custody has, on average, better outcomes.
The research behind this episode:
Canessa, Stella, Gordon Dahl, Anna Hasselqvist, Costas Meghir, Susan Niknami, Marten Palme, Helmut Rainer, Olof Rosenqvist, and Pengpeng Xiao. 2026. "Life After Divorce: Effects of Joint Custody on Parents and Children." CEPR Discussion Paper 21780. 
To cite this episode:
Phillips, Tim, Gordon Dahl, and Costas Meghir. 2026. "Life after divorce." VoxTalks Economics (podcast). 

About the guests

Gordon Dahl is Professor of Economics at the University of California, San Diego, and a Fellow in the Labour Economics programme of the Centre for Economic Policy Research. His research spans the family, public policy and the labour market, including how family income shapes children's achievement, peer effects among co-workers and family members, the effects of incarceration on employment, and how welfare use passes between generations.
Costas Meghir is the Douglas A. Warner III Professor of Economics at Yale University and a CEPR Fellow in the Labour Economics, Development Economics and Public Economics programmes. His research spans labour supply and welfare programmes, marriage markets and how resources are shared within households, informal labour markets, and early childhood development.
Research cited in this episode

The best interests of the child standard. Since the 1970s, most custody law has told judges to decide in the child's best interests rather than weigh the parents' claims. Most countries now read this as keeping both parents involved, which is why joint custody is the default in many jurisdictions. The standard leaves wide discretion to judges, and Meghir says judges get little systematic evidence on what works. Elizabeth Scott and Robert Emery examine why the standard has persisted despite this criticism in "Gender Politics and Child Custody: The Puzzling Persistence of the Best-Interests Standard" (Law and Contemporary Problems, 2014).
The tender years doctrine. Before the mid-19th century, English law treated children as their father's property. The Custody of Infants Act 1839, passed after a campaign by Caroline Norton, let mothers petition for custody of children under seven, and the presumption that young children belong with their mother spread across Europe. Dahl raises it to show how far the legal default has moved in less than two centuries, from father, to mother, to both.
Random assignment of judges. Families who end up with joint custody differ from those who do not, so a simple comparison cannot separate the effect of the arrangement from the effect of the family. In Sweden, custody disputes go to judges at random, and judges differ in how often they award joint custody. Comparing families who drew a lenient judge with families who drew a strict one isolates the effect of the ruling itself. Economists have used the same design to study prison sentences, for example Jeffrey Kling in "Incarceration Length, Employment, and Earnings" (American Economic Review, 2006). The method only measures effects for cases where judges could disagree; it says nothing about cases where every judge would reach the same decision.
Swedish court archives. Custody rulings are public records in Sweden, but no national database holds them. The authors requested files from all 48 district courts and received documents from 45. Digital archives covered cases from about 2010; for earlier years, the team visited court archives and scanned 19,491 paper rulings by hand. Dahl estimates that 80% of the project's time went on collecting data.
Swedish administrative registers. Statistics Sweden registers cover the whole population and record earnings, employment, family links and place of residence. The authors linked these to prescription records, which show who takes antidepressant, anti-anxiety and ADHD medication, and to records of intimate partner violence. This is why the research could follow mothers, fathers and children for years after each ruling.
National tests and school quality. All Swedish pupils sit the same national tests in Swedish and mathematics in grades three, six and nine. The authors use these scores to measure children's achievement, and build a measure of school quality from how much better or worse a school's pupils score than their backgrounds predict. In the paper, joint custody raises test scores by 0.47 of a standard deviation, which Meghir likens to about two extra years of schooling.
More VoxTalks Economics episodes

Helping fathers to acknowledge paternity. Anna Raute on what happens to mothers and children when fathers do not formally recognise their child, and which policies change that.
Love, money and parenting. Fabrizio Zilibotti on what economic research tells us about parenting, and about raising children who thrive.
Related reading on VoxEU.org

The effect of joint custody on marriage and divorce, a VoxEU column by Martin Halla using US state reforms to show that joint custody laws raised marriage rates without a clear effect on divorce.
The effect of parental divorce on children's long-term outcomes, a VoxEU column using Austrian data to estimate how divorce affects children's education, employment and health as adults.

Since March 2022, it has been harder to buy an iPhone in Russia, because Apple chose to stop selling there. So did Prada, Renault, Starbucks, Nike and more than 1,000 other firms. These private sanctions added to the official sanctions imposed by 45 countries.
Beata Javorcik (EBRD, Oxford, CEPR) and her co-authors wanted to know if private sanctions did anything more than generate good headlines. To do this, they matched millions of Russian customs records to the trademarks on the goods, so they could tell an iPhone from a Samsung phone and a Gucci scarf from a Gucci bag. Would imports of goods under voluntary sanctions stop? Would the brands cheat? Would importers find an other way to get goods into the country through the back door? She tells Tim Phillips what private sanctions on Russia have achieved.
The research behind this episode:
Chupilkin, Maxim, Beata Javorcik, Alexander Plekhanov, and Aleksandra Peeva. 2026. "Not Wearing Prada: Do Private Sanctions Reinforce Official Sanctions?" CEPR Discussion Paper 21774. 
To cite this episode:
Phillips, Tim, and Beata Javorcik. 2026. "Not wearing Prada." VoxTalks Economics (podcast).

About the guest

Beata Javorcik is Chief Economist of the European Bank for Reconstruction and Development, on leave from the University of Oxford, where she is Professor of Economics and a Fellow of All Souls College. She is a Fellow of the Centre for Economic Policy Research in the International Trade and Regional Economics programme. Her research spans foreign direct investment, shocks to production networks, trade under sanctions and the evasion of import duties.
Research cited in this episode

Official sanctions on Russia. After the full-scale invasion of Ukraine in February 2022, 45 economies, including the US, the EU and the UK, imposed sanctions on Russia. They cut selected Russian banks off from the SWIFT payment messaging system, immobilised the reserves of Russia's central bank, limited Russia's earnings from hydrocarbon exports and banned exports of arms, dual-use goods, advanced technology, industrial equipment and luxury goods. By the end of 2022, around 40% of product lines were at least partly covered. The luxury ban explains some odd entries. Ski suits and sports clothing priced above €300 are sanctioned, and champagne is banned while prosecco is not. Enforcement sits with several bodies: in the US, the Office of Foreign Assets Control and the Commerce Department; in the EU, individual member states; in the UK, the Office of Financial Sanctions Implementation and the Office of Trade Sanctions Implementation.
Private sanctions and public opinion. Oliver Hart, David Thesmar and Luigi Zingales surveyed 2,915 Americans, a representative sample, in May and June 2022. Of these, 61% agreed that doing business in Russia is like being an accomplice to the war, and that firms should sever ties whatever the consequences. Javorcik raises the study to explain why firms with no legal obligation to leave Russia chose to go anyway: reputation, the threat of boycotts, pressure from investors, employees and business partners, and sometimes the values of managers. Hart, Oliver, David Thesmar, and Luigi Zingales. 2024. "Private Sanctions." Economic Policy 39 (117): 203-268.
"The business of business is business." The phrase is a popular summary of the view Milton Friedman set out in a 1970 essay in the New York Times Magazine, "The Social Responsibility of Business Is to Increase Its Profits." Hart and his co-authors found that only a minority of their respondents treated the decision to leave Russia as a purely commercial one.
The Yale list. A team at the Yale Chief Executive Leadership Institute, led by Jeffrey Sonnenfeld, has tracked what more than 1,500 major companies said about their Russian operations since the invasion. To qualify, a firm must have revenue above $100 million, be majority owned from outside Russia and Belarus, and have meaningful operations in its home country, in Russia and in at least one other country. The team grades firms from full withdrawal to "digging in," and keeps a separate record of firms that reneged on their promises to leave. Javorcik and her co-authors use the list to classify the owners of 1,657 Western trademarks. Only 11 firms moved from strict private sanctions to doing little or nothing.
Customs data with trademarks. The paper draws on transaction-level records of Russian imports from 2016 to 2023, about 12 million records in 2022 alone. Each record shows the product code, the value, the quantity, the trading partner and the trademark. The products are classified at the six-digit level of the Harmonized System, which has more than 5,600 categories. The trademark field contained more than 1.2 million spellings; the authors used a large language model to standardise them, which merged 600 versions of "Samsung" into one.
Trade diversion through neutral countries. Countries that do not participate in sanctions, including China, Turkey and the UAE, do not monitor re-exports to Russia. After the invasion, the share of imports arriving via traders in these neutral jurisdictions rose by an additional 16 percentage points for brands whose owners announced private sanctions. The same authors traced a related route in "The Eurasian Roundabout: Trade Flows into Russia through the Caucasus and Central Asia" (Chupilkin, Javorcik, and Plekhanov 2026, European Economic Review).
Tariff equivalent. Trade economists often express a barrier to trade as the ad valorem tariff, a tax set as a percentage of the value of the goods, that would cause the same fall in trade. On this measure, private sanctions against Russia equal a tariff of between 9% and 84%. The range is wide because the answer depends on the trade elasticity, which measures how strongly trade responds to a change in costs.
The Clark Center Forum surveys. On 8 March 2022, the Kent A. Clark Center for Global Markets at Chicago Booth asked its panels of leading economists if the sanctions already in place would lead to a deep recession in Russia. Of the respondents, 93% of the US panel and 94% of the European panel agreed. A deep recession did not follow. In June 2025, a majority of the European panel agreed that, on the evidence of the past 10 years, Western-led economic sanctions do not substantially deter target countries. Javorcik, a panel member, agreed, citing trade diversion and sanctions circumvention.
The UN vote. On 2 March 2022, 141 countries in the UN General Assembly voted for a resolution that condemned Russia's invasion and demanded its withdrawal from Ukraine. Javorcik contrasts this with the 45 economies that impose sanctions. The effectiveness of sanctions depends on how many countries take part.
More VoxTalks Economics episodes

Do sanctions work? Moritz Schularick takes the long view of the evidence on sanctions of every type, and asks if policymakers will impose the ones that bite.
Trading around geopolitics Giancarlo Corsetti, Banu Demir and Beata Javorcik on whether Turkish exporters filled the gap in the Russian market, and an earlier sighting of the balloon.
What impact have trade sanctions had on Russia? Dzhamilya Nigmatulina uses railway shipments, company accounts and procurement records to measure what official trade sanctions did inside Russia.
Related reading on VoxEU

Beyond mandated sanctions: Western firms' voluntary departure from Russia, a VoxEU column by Tetyana Balyuk and Anastassia Fedyk on how shareholder pressure drove Western firms out of Russia.
Export bans that weren't really bans: How Russia kept importing military goods, a VoxEU column by Lisa Scheckenhofer, Feodora Teti, David Torun and Joschka Wanner on the gaps, transit loopholes and third-country routes that kept military components flowing.
Economic consequences of Russia's invasion of Ukraine: Views of leading economists, Romesh Vaitilingam's March 2022 report on the Clark Center survey that predicted a deep Russian recession.

For more than 1,300 years, China chose its top officials by written exam. Its top officials were chosen meritocratic ally -- or were they?
When the results came out, each successful candidate went to pay his respects to the men who had marked his exam. He called the examiner master, and the bond lasted for life.
Ruixue Jia (UC San Diego, CEPR) and her co-author Ying Bai followed 24,269 graduates of the Qing dynasty's imperial examination, from 1644 to 1905, to see who reached the top of the imperial state. A high mark in the examination was important, but so did an examiner who later rose to power. Jia tells Tim Phillips how merit and patronage worked together.
The research behind this episode

Bai, Ying, and Ruixue Jia. 2026. "Meritocracy and the Networks It Forged: China's Imperial Examination." CEPR Discussion Paper 21814. Prepared for The ANNALS of the American Academy of Political and Social Science.
To cite this episode

Phillips, Tim, and Ruixue Jia. 2026. "Merit, masters and China's imperial exam." VoxTalks Economics (podcast). 

About the guest

Ruixue Jia is Professor of Economics at the School of Global Policy and Strategy, University of California San Diego, where she co-directs the China Data Lab. She is also a Visiting Professor at the University of Hong Kong, a Fellow of the Centre for Economic Policy Research in its Political Economy and Economic History programmes, and co-editor of the Review of Economics and Statistics. Her research spans elite formation, the politics of education and science, and the historical roots of China's development. She is co-author, with Hongbin Li and Claire Cousineau, of The Highest Exam: How the Gaokao Shapes China (Belknap Press, 2025).
Research cited in this episode

The imperial examination. China's system for recruiting officials through competitive written exams on the Confucian classics and literary composition. It began around 605 CE, expanded under the Song dynasty around 1000 CE, and was abolished in 1905. In the Qing dynasty it had three levels. The entry (prefectural) exam was held twice every three years; the provincial and national exams once every three years. About 240 candidates passed each national exam, earning the title of jinshi. Bai and Jia study all 112 national exams held between 1644 and 1905.
How many took part. Every man could sit the exam in principle, but preparation cost years of study and lost income. Jia says that in the 18th century about two million men registered for the entry-level exam, roughly 2% to 3% of men aged 15 to 50, and that families often pooled resources to put one son forward. By her calculation, even a man who tried five times had less than a 1% chance of passing the entry level. These are her figures from the conversation.
Fan Zhongyan. The Northern Song statesman and poet (989 to 1052) whose story Jia uses to show how the exam sold itself. He lost his father as an infant and grew up in modest circumstances, passed the national exam in 1015, and rose to become one of the empire's most senior officials. Stories like his, Jia argues, sustained belief in the system. What mattered was perceived mobility, not the realised rate.
The high and low categories. Successful national candidates were ranked and divided at a cutoff. The top two groups received the jinshi degree; the third and largest group received the lesser tong jinshi ("similar to jinshi") degree. Bai and Jia compare the cutoff to the admission thresholds of elite universities today. Candidates just above it started their careers in better positions.
Top office. Bai and Jia define top office as rank three or above in the nine-rank system, which covered ministers, governors general and provincial governors. Only about 12.6% of jinshi reached it, on average 16 years after passing the exam. In practice, appointments were shaped by a handful of Grand Secretaries and Grand Ministers of State; on average seven people held these posts in any year.
The master and disciple relationship. Each national exam was overseen by one or two chief examiners and two or three vice examiners, all serving officials. After the results, graduates visited their examiners, called them "master teacher" and called each other "classmates". The historian Ichisada Miyazaki describes it as "a pledge between them to assist each other to weather the storms of political life" (Miyazaki, Ichisada. 1981. China's Examination Hell: The Civil Service Examinations of Imperial China. Yale University Press, p. 56). Philip Kuhn called the system "a veritable faction factory" (Kuhn, Philip A. 2003. Origins of the Modern Chinese State. Stanford University Press). Because papers were anonymous, the link between a candidate and his examiners was set by chance, which lets Bai and Jia treat it as a natural experiment.
Power or mentoring. Bai and Jia measure ties to powerful examiners by counting how many years a candidate's examiners held key central posts in the decade after the exam. To separate a good teacher from a well-placed patron, they compare an examiner's power before and after the exam. Power that came later mattered more, which points to patronage rather than instruction alone.
Merit and connections in modern China. Jia found a similar pattern in an earlier study of provincial leaders after 1993, in which neither strong economic performance nor links to the top leadership was enough for promotion on its own. Jia, Ruixue, Masayuki Kudamatsu, and David Seim. 2015. "Political Selection in China: Complementary Roles of Connections and Performance." Journal of the European Economic Association 13 (4): 631-668.
More VoxTalks Economics episodes

The Success of the Embedded State. James Robinson on how unpaid local elites ran British government two centuries ago, and why they were more efficient than salaried officials.
Related reading on VoxEU

Who becomes a top politician in China? Ruixue Jia, Masayuki Kudamatsu and David Seim on why Communist Party leaders need both connections and a strong record to reach the top.
Institutions and power structure: Imperial China and feudal Europe compared. Gérard Roland, Yang Xie and Ruixue Jia on why Chinese emperors had reason to keep the route into the elite open to ordinary people.
It's not what you know, but who you know: The role of connections in academic promotions. Manuel Bagues and Natalia Zinovyeva on randomly assigned evaluators in Spanish academic promotions, and how much a link to the committee was worth.

In March 2025, Apple chartered cargo flights to deliver 600 tonnes of iPhones from India to the United States. A year earlier, four in five smartphones that imported to the US came from China. 
One of the aims of US trade policy has been to decouple the US economy from China. So is the strategy working? Chad Bown (PIIE, CEPR) tells Tim Phillips how he examined the US import data product by product to see how American importers coped with Trump's second trade war. In consumer electronics, many firms quietly built a second supply chain in tariff-exempt countries before 2025, and switched sourcing away from China almost overnight in 2025. But clothing and footwear did not switch, because alternative source countries like Vietnam faced tariffs almost as high. When the US taxes imports from every country, the decoupling strategy gets lost.
The research behind this episode:
Bown, Chad P. 2026. "How Did Trump's 2025 Trade War Affect the Decoupling of US-China Supply Chains?" CEPR Discussion Paper DP21801 (gated). Forthcoming in Asian Economic Policy Review. 
To cite this episode:
Phillips, Tim, and Chad P. Bown. 2026. "Decoupling from China after Trump's Trade Wars." VoxTalks Economics (podcast).

About the guest

Chad P. Bown is the Reginald Jones Senior Fellow at the Peterson Institute for International Economics and a Fellow in the International Trade and Regional Economics programme of the Centre for Economic Policy Research. He was chief economist at the US Department of State from January 2024 to January 2025, and senior economist for international trade and investment on President Obama's Council of Economic Advisers. His research spans trade policy, industrial policy, economic security and supply chains. He co-created the Trade Talks podcast with Soumaya Keynes in 2017, and with Keynes he is co-author of How to Win a Trade War (Simon & Schuster, 2026).
Research cited in this episode

The 2018-19 Section 301 tariffs. In Trump's first term the US imposed tariffs on imports from China in stages, on product lists set under Section 301 of the Trade Act of 1974. Lists 1, 2 and 3, mostly intermediate inputs such as auto parts, ended at 25%. List 4A began at 15% and was cut to 7.5% in February 2020 under the Phase One agreement. List 4B, mostly consumer goods such as smartphones, laptops and toys, was delayed "for Christmas season" and never imposed. By the end of the first trade war, roughly two thirds of US imports from China faced new tariffs. Bown's point is that the goods spared in 2018-19 were the ones hit hardest in 2025.
The 2025 IEEPA tariffs on China. In February and March 2025, before Liberation Day, the US imposed two rounds of 10% tariffs on all imports from China under the International Emergency Economic Powers Act, justified by concerns over fentanyl. For the first time this covered smartphones and other List 4B goods. One of the two was removed in November 2025 after Presidents Trump and Xi met in South Korea.
Liberation Day. On 2 April 2025 the US announced tariffs on most of its trading partners, at rates that varied by country. A long list of products, including smartphones, was exempt under Annex II. On 9 April the country rates were paused and a 10% baseline applied while countries negotiated. China's rates escalated after retaliation on both sides; the Liberation Day actions on China alone reached 125% before a truce in Geneva in May. The exemptions matter to the episode. A tariff on China changes sourcing only if the alternatives face a lower one.
The August 2025 tariffs on India. The US raised tariffs on India by a further 25 percentage points in August 2025, citing India's purchases of Russian oil. Smartphones were again exempt, so Apple's Indian supply chain stayed tariff free. For some clothing, India ended up facing a larger tariff increase than China.
The Supreme Court ruling on IEEPA tariffs. On 20 February 2026 the US Supreme Court ruled that the country-level tariffs imposed under IEEPA were illegal. The Section 232 sectoral tariffs and the Section 301 tariffs on China were not part of the case. The administration removed the IEEPA tariffs and began imposing new ones under other legal authorities, which is why Bown warns that some of the 2025 effects may yet reverse.
Apple's alternative supply chain in India. Apple and its contract manufacturers, including Foxconn and Tata Electronics, spent several years building iPhone assembly in India. Patrick McGee tells the story in Apple in China: The Capture of the World's Greatest Company (Simon & Schuster, 2026). Over the last nine months of 2025, 40% of US smartphone imports came from China and 46% from India. Laptops, monitors and video game consoles moved in a similar way, mostly to Vietnam.
Inputs for AI. The paper defines AI inputs using the product codes that Nvidia publishes for export control compliance: certain semiconductors, printed circuit boards, servers and other data centre hardware. These made up about 14% of US imports in 2025. They grew by $183 billion that year, more than the $144 billion rise in total US goods imports. A separate classification by Michael Waugh (2026) finds a larger share, at 23%.
US tariffs on Chinese electric vehicles. In 2024 the Biden administration raised US tariffs on electric vehicles from China to 100%, using the authority of the 2018 Section 301 action. China exported 40% of the world's electric vehicles in 2024, according to the International Energy Agency, but almost none to the United States.
China's export restrictions on rare earths. In April 2025 China restricted exports of rare earths and permanent magnets, of which it produces about 90% of world supply. Bown did not include these products in the paper, but they are the reverse of the decoupling story. They are goods for which the US found no alternative supplier.
Tariff pass-through to consumer prices. Bown suggests that firms with an alternative supplier may explain why some prices, such as the iPhone's, did not rise. He points to work by Alberto Cavallo, Paola Llamas and Franco Vazquez (2025), "Tracking the Short-Run Price Impact of U.S. Tariffs," NBER Working Paper 34496, which tracks how the 2025 tariffs reached retail prices.
How to Win a Trade War. Soumaya Keynes and Chad P. Bown. 2026. How to Win a Trade War: An Optimistic Guide to an Anxious Global Economy. New York: Simon & Schuster. The authors argue that the conflict with China will not reverse, and that other economies are now dealing with China-related shocks of their own.
More VoxTalks Economics episodes

Making sense of the US-China trade war, in which Bown explained the first trade war in 2021, as it ended. It is the "before" to this episode's "after".
Tariff Confusion, in which Kalina Manova explains how the frequency of tariff announcements in 2025 cut trade by more than the tariffs themselves.
Related reading on VoxEU.org

US-China decoupling: Rhetoric and reality, a VoxEU column showing that after the first trade war US imports from China slowed, but supply chains for strategic products stayed intertwined with China.
What comes next for global supply chains might be complicated, a VoxEU column on why a falling Chinese share of US imports does not mean Chinese firms have left the supply chain.
Tariff confusion, a VoxEU column by Kalina Manova, Dennis Novy, Thomas Sampson and Aaron Tang on how confusion about current US tariffs reduced trade in 2025.