Fernando Leibovici

Cocoa stockpiles plunge to record low Chocolate makers grab available reserves to counter acute global shortage

See this article posted today at @financialtimes.com for further info: www.ft.com/content/e2ae...

This Valentine's day meets us with cocoa prices at an all-time high

While proper demand-supply decomposition would help assess the drivers, culprit doesn't seem high demand for heart-shaped chocolate boxes

Instead, negative supply shocks like adverse weather or crop disease

Surprised to see suggestion that lower core PCE inflation in 2019 due to tariffs + uncertainty.

What is the best evidence backing this interpretation of the core PCE dynamics?

Markets may be underestimating how much inflation will fall this year It is not just tariffs that might affect growth but also trade uncertainty and the effects of the Trump policy agenda

Richard Clarida at @financialtimes.com asks: "How the US Federal Reserve is — and should be — thinking about tariffs and monetary policy"?

Interesting perspective on the effect of growing trade (and broader) uncertainty

www.ft.com/content/0e63...

e.g., CHIPS act has acted to reduce dependence on imported semiconductors by introducing subsidies/grants.

Not necessarily advocating the use of either of these policies, but if we take the goal as given, its worth thinking about what would be the best way to achieve it.

2. WTO rules? Tariffs apparently are easier to justify under national security grounds, while subsidies may more clearly violate WTO rules & trigger countervailing duties.

3. Tariffs are faster, easier to implement, and with quicker impact.

What am I missing?

Again, if we agreed on the goal, sounds like subsidies would be more focused/less distortive relative to tariffs?

But I guess I can see a few reasons why tariffs could be more palatable:

1. Tariffs raise revenue, while subsidies involve taxpayer transfers.

If we agreed on the goal, is this the only way to achieve it?

Why not subsidies?

Subsidies would encourage domestic production of these strategic sectors, but without raising the input costs of domestic manufacturers and other sectors that rely on steel and aluminum.

Tariffs raise cost of steel & aluminum from rest of world, expenditure switching to domestic producers - less reliance on foreign metals!

Problem: Tariffs raise cost of aluminum & steel used by manufacturers, making their goods less competitive and more expensive domestically

Some quick thoughts on the tariffs on steel & aluminum - key inputs for infrastructure, defense, manufacturing

Concern: Foreign subsidies & interventions make US too dependent on imported steel & aluminum

Goal: Promote domestic production

But are tariffs best for this goal?

EU strikes blockbuster trade deal with Mercosur Accord would create market of 700mn by dropping tariffs on more than 90% of goods

Mercosur itself is not a high quality trade agreement but this EU deal is just a reminder of how other countries are seeking to expand trade while the US moves in a different direction....
EU strikes blockbuster trade deal with Mercosur - on.ft.com/3OGPfkP via @FT

Artificial Intelligence and Inflation Forecasts Analysis of large language models (LLMs) shows their potential to generate inflation forecasts at least as good as the most respected, but costlier, sources of inflation forecasts.

Artificial Intelligence and Inflation Forecasts, now out at the FRB St. Louis Review, with @leibovicif.bsky.social
www.stlouisfed.org/publications...

New industrial Policy Observatory database (NIPO) tracked 2,500+ measures in 2023 alone. Important context for debates on trade fragmentation & economic security. 1/

www.globaltradealert.org/reports/112

Hi #EconSky, I just set up this international trade research and policy starter pack

Not sure how this works exactly, but please add/let me know of other trade research and policy people that I missed

go.bsky.app/NghAP3m

Thanks, that's really interesting and helpful

How are other Latam countries doing in refocusing between China and US? Looks like another missed opportunity for both US and Latam!

Last revisions to the paper "Trade Deficits with Trade Wars" done:
papers.ssrn.com/sol3/papers....
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