Joseph Gagnon
@gagnonmacro.bsky.social
International macroeconomist. I specialize in exchange rates, trade balances, monetary policy, and inflation.
Economics
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Business
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Joseph Gagnon
@gagnonmacro.bsky.social
· Aug 19
The Fed’s September dilemma
The Federal Reserve’s September 16-17 policy meeting may well be one of the most contentious in years. Although financial market investors see a 25 basis point interest rate cut as close to a lock, so...
www.piie.com
My latest blog post with Steve Kamin explores the dilemma of the Fed’s next meeting. Markets expect a cut, but inflation expectations are rising. www.piie.com/blogs/realti...
Adam Posen
@adamposen.bsky.social
· Aug 19
The New Economic Geography
Who profits in a post-American world?
shared.outlook.inky.com
My article The New Economic Geography is out today in @foreignaffairs.com
Please read!
(Ungated link, suitable for sharing)
shared.outlook.inky.com/link?domain=...
Please read!
(Ungated link, suitable for sharing)
shared.outlook.inky.com/link?domain=...
Joseph Gagnon
@gagnonmacro.bsky.social
· Jul 25
I’ll be working on that next month. First priority is to cut the budget deficit. Also get foreign countries to boost their domestic spending, including on US exports, in exchange for tariff reductions.
Joseph Gagnon
@gagnonmacro.bsky.social
· Jun 18
Fed projected to turn profitable again after three years of losses
www.piie.com
My colleague Asher Rose just posted a nice chart showing the Fed’s projected return to profitability after 3 years of losses. QE raises Fed profits and makes them more variable. www.piie.com/research/pii...
Joseph Gagnon
@gagnonmacro.bsky.social
· Apr 30
This result holds up with dozens of different auxiliary variables to control for an array of possible omitted factors and in many different country samples.
Joseph Gagnon
@gagnonmacro.bsky.social
· Apr 30
Surprising fact. The most important variable in explaining differences across countries in the rise of inflation under COVID is where inflation was decades earlier. This is true for both advanced and developing economies. Even true within the euro area!
Joseph Gagnon
@gagnonmacro.bsky.social
· Apr 30
The role of long histories of "lived experience" in the COVID-era inflationary surge
A rough consensus has evolved around the causes of the COVID-era inflationary spike: the disruption in supply chains; the shift in demand from services to goods; the surge in commodity prices that fol...
www.piie.com
My paper with Steve Kamin on long memory in COVID inflation is now on the PIIE website. www.piie.com/publications...
Finally, the President's ability to negotiate exceptions to the tariffs in exchange for financial or political support creates a threat to democracy and the rule of law that Congress should oppose. n/n
The odds of a recession just went way up. That would reduce our trade deficit (unless the whole world goes into recession--a distinct possibility). Is that worth it? 4/n
Even more importantly, tariffs are a horrible tool for this purpose. They will not reduce our trade deficit unless they persuade investors to dump US assets because our government is pursuing harmful policies. 3/n
Second, overall trade surpluses are a better (but not perfect) indicator of foreign policies that contribute to the US trade deficit than bilateral surpluses. 2/n
There is so much wrong with the new tariff policy, it is hard to begin. First of all, it makes no sense to tariff something we will never produce in the US. I don't see bananas and coffee on the exempted list. 1/n
With reported US net international liabilities having reached an astonishing 90% of GDP, continued foreign borrowing (i.e., trade deficit) is not on a sustainable path.
international-economy.com
Back from March vacation. My take on a Mar-a-Lago Accord is included in this symposium with other observers. I focused my remarks on what I would like to see, not what is likely to happen (which is not much in the near term). international-economy.com/TIE_F24_Mara...
Joseph Gagnon
@gagnonmacro.bsky.social
· Mar 14
The hidden costs of Trump’s tariffs: productivity loss and market uncertainty - EuroFinance | The global treasury community
On March 5, US President Donald Trump addressed Congress, opening his speech with the statement, "America is Back." During his address, Trump asserted that other nations have long imposed tariffs on ...
www.eurofinance.com
In case anyone wants to read more about the effects of tariffs! www.eurofinance.com/news/the-hid...
Joseph Gagnon
@gagnonmacro.bsky.social
· Feb 25
Fiscal and exchange rate policy, not tariffs, can reduce the trade deficit
The Peterson Institute for International Economics (PIIE) is an independent nonprofit, nonpartisan research organization dedicated to strengthening prosperity and human welfare in the global economy through expert analysis and practical policy solutions.
www.piie.com
Yesterday I discussed why tariffs will not reduce the US trade deficit. Today I show 2 policies that can do so and I link to the latest paper backing up these results in a more complete model. www.piie.com/research/pii...
Joseph Gagnon
@gagnonmacro.bsky.social
· Feb 13
Trump pushes for lower interest rates alongside reciprocal tariffs
US presidents traditionally avoid even the appearance of meddling with monetary policy
www.voanews.com
Does it make sense to raise tariffs and cut interest rates now? No. www.voanews.com/a/trump-push...
Joseph Gagnon
@gagnonmacro.bsky.social
· Feb 12
Argentina clearly has comparative advantage in agriculture. But we know from Lerner that barriers to imports are also barriers to exports. So the result you cite--loss of grain exports in favor of import-substituting products--is exactly as expected.
Joseph Gagnon
@gagnonmacro.bsky.social
· Feb 11
https://www.youtube.com/watch?v=R6MeODGKmwg
t.co
I talk tariffs, trade deficits, and a lot more with @scclemons.bsky.social. t.co/5aT8g0WGSV
Joseph Gagnon
@gagnonmacro.bsky.social
· Jan 22
We Know What Causes Trade Deficits
On March 31, President Donald Trump ordered a study of the causes of the US trade deficit that will focus on trade barriers and unfair trade practices in foreign countries. Economists, however, broadly agree that trade barriers do not cause trade deficits. A country can have a trade deficit only if it is borrowing on net from the rest of the world. Trade barriers have only minor effects on borrowing and lending decisions.
www.piie.com
I agree with Dani, but he omits the point that even he lists as Trump's first objective: to reduce the trade deficit. Tariffs do nothing for the deficit. I blogged that back in 2017 and a great 2019 IMF WP by Furceri, Hannan, Ostry, and Rose documents it convincingly. www.piie.com/blogs/trade-...
Joseph Gagnon
@gagnonmacro.bsky.social
· Jan 22
It is something I have focused on a lot but often felt I was the only economist who did. Trying to increase net exports makes more sense when below potential at the zero bound than when at full employment.
Joseph Gagnon
@gagnonmacro.bsky.social
· Jan 21
Taming the US trade deficit: A dollar policy for balanced growth
President Donald Trump launched a trade war to eliminate the longstanding US trade deficit. But the trade deficit has only grown on his watch because tariffs were the wrong policy choice. Trade deficits are not always a bad thing, but a wealthy country like the United States should not run a perpetual deficit. Decades of US trade deficits have piled up debt that makes future generations of Americans less well off, as they must pay interest and dividends to foreigners.
www.piie.com
I described how and why to do this back in 2020. The fiscal deficit and the trade deficit are much larger now, making this advice all the more important. A weaker dollar can offset the drag on growth from budget cuts. n/n www.piie.com/publications...
Joseph Gagnon
@gagnonmacro.bsky.social
· Jan 21
Fiscal and exchange rate policies drive trade imbalances: New estimates
A 2017 PIIE analysis found that fiscal balances and foreign exchange intervention—more broadly, government purchases of foreign assets to influence exchange rates—are the most important factors behind differences in current account balances across countries and over time. The current account is the broadest measure of a country's balance of trade. It records all income received from foreigners and payments made to foreigners.
www.piie.com
In 2021, Madi Sarsenbayev and I updated my earlier work showing that there are 2 main policies to shrink the trade deficit. They work well together. Reduce the fiscal deficit and push down the dollar. 3/n www.piie.com/publications...
Joseph Gagnon
@gagnonmacro.bsky.social
· Jan 21
I pointed out 8 years ago that we know what causes trade deficits. I predicted Trump's tariffs would not reduce the trade deficit and I was right. The deficit continued to grow during his first term. 2/n www.piie.com/blogs/trade-...
Joseph Gagnon
@gagnonmacro.bsky.social
· Jan 21
America First Trade Policy – The White House
January 20, 2025 MEMORANDUM FOR THE SECRETARY OF STATE THE SECRETARY OF THE TREASURY THE SECRETARY OF DEFENSE THE SECRETARY OF COMMERCE THE SECRETARY OF
www.whitehouse.gov
On his first day in office, President Trump published a memo titled "America First Trade Policy." His first item of business, similar to 8 years ago, is to find out what causes our "trade deficits in goods". 1/n www.whitehouse.gov/presidential...
Joseph Gagnon
@gagnonmacro.bsky.social
· Jan 17
Why did inflation rise and fall so rapidly? Lessons from the Korean War
The speed of both the rise and fall of US inflation in 2021–23 took many economists by surprise. This paper shows that the rise of COVID era inflation reflects three independent shocks: a plethora of pandemic-related shifts in demand patterns and supply disruptions; the largest commodity price surge in 40 years caused by the Ukraine war; and strong monetary and fiscal responses to the pandemic, which kept labor markets tight. The authors document the transmission of these shocks through the main components of private consumption: durable goods, nondurable goods, and services.
www.piie.com
My paper with Asher Rose on a 75 year perspective on COVID inflation is out. www.piie.com/publications...