RoW ex-China is likely to be unproblematically aligned on low trade barriers. Yes, before all this, there was a significantly likelihood that eg Europe would put up barriers to China, perhaps in concert with a saner US. They still might. 1/

But China, especially ex-US demand, is a massive potential source of disinflation. So if RoW-ex-China wants to avoid recession, it can modulate barriers with China to that end. 2/

For example, the EU might put up sizable barriers to, say, auto imports, where they have an incumbent industry they wish to preserve, and perhaps overcapacity due to limited US demand. 3/

But most of what China produces Europe does not have an immediate need to protect. Like Biden's US, over a medium term, EU may be interested in more diversified sourcing for a variety of important industries. But that won't require precipitous imposition of barriers into the teeth of a crisis. 4/

So what I'd advise e.g. European countries would be very narrow, perhaps steep, barriers to China in strategic industries, but otherwise openness through the adjustment period. The EU can afford an overall trade deficit at little meaningful cost, as long as its key industries are protected. 5/

After the storm, they can go back to what we and they were working on before, more diversified and resilient supply, and more tools to nudge toward overall balance, without breaking the global trade system. 6/

Those are important but less urgent projects. /fin

If Trump remains obstinately on this course, a US recession (at the very least) is certain. Whether the recession is global depends whether rest-of-world big economies can get over either their austerity fetish or their unwillingness to seriously tax the very rich. 1/

(Traditionally, it's deficit spending that's considered stimulus. But taxing the very wealthy affects overall demand almost not at all, while government spending still stimulates demand. Investment spending is a function of anticipated consumer demand much more than rich-person wealth.) /fin

The fact of the matter is the Biden Team did a pretty phenomenal job on jump-starting the reshoring strategic industries, especially given the constraints imposed by an often bad-faith Congress. As @ryanlcooper.com predicted, we are blowing that all up. prospect.org/economy/2025...

See also @triforcecap.bsky.social bsky.app/profile/trif...

legalizing fraud hasn’t made crypto prices go 🚀. who woulda thunk.

( re www.theverge.com/policy/64539... )