Economic Risks in Global Markets

Given the plan to have the steel & aluminum tariffs jump to 50% this week, I wanted to share data on the downstream industries whose cost structures are most impacted by this action. I've done this by using the latest benchmark use table from the input-output accounts (https://lnkd.in/eQdPji9) and calculated each industries' combined use of (i) Iron and steel mills and ferroalloy manufacturing [331110]; (ii) steel product manufacturing from purchased steel [331200]; (iii) Alumina refining and primary aluminum production [331313]; and (iv) Aluminum product manufacturing from purchased aluminum [33131B]. I then summed the use across these four commodities and divided this sum by each industries' total intermediate inputs (which includes all goods, utilities, and services). Below are the top sectors. Thoughts: •For many industries in fabricated metals (starting with NAICS 332), we see steel and aluminum make up more than 40% of the cost structure. If we assume that domestic prices ultimately rise something like 35% from a non-tariff scenario, that would represent a 15% increase in costs. This is a conservative estimate because I'm using all intermediate inputs as the denominator; if I used only goods and utilities, this figure would be much higher. •As expected, we see substantial impacts on transportation equipment (the major impact on military armored vehicles is a bit ironic) and machinery. Transportation equipment and machinery are two sectors where the USA is very globally competitive; these tariffs make us less competitive by raising producers' costs. For example, the last thing John Deere needs is to be paying higher prices for steel and aluminum as it tries to compete with European rivals for business in Australia. •It's worth again stressing these affected downstream industries employ far more people than employed in making steel and aluminum. This is why tariffing upstream industries has been termed "Self-Harming Trade Policy" (see https://lnkd.in/gWgxQjtY). Implication: many industries will be starting this week with the reality that they are looking at their costs rising substantially due to POTUS's steel and aluminum tariff escalation. This is precisely the type of action that makes the FOMC less likely to reduce interest rates anytime soon. #supplychain #economics #shipsandshipping #manufacturing #freight

Leaders, if you're going ahead with mass layoffs, you can't seriously be thinking that your #diversity, #equity, or #inclusion work will have any credibility left after the fact. Fundamentally, DEI work is about showing people that they matter by building a workplace where they can thrive. And fundamentally, mass layoffs communicate the exact opposite: that no matter a person's skill, experience, productivity, contribution, passion, or loyalty, they ultimately are just another cost to be cut. That people mean nothing in the face of short-term profit. The consequences of mass layoffs on your people, your biggest assets, are immediate and catastrophic. 📉 One study found a 41% decline in job satisfaction among survivors of a layoff, leading to a 36% decline in their desire to stay with the workplace. 📉 Another study found that a 1% workforce layoff resulted in a 31% increase in voluntary turnover. 📉 One study found a 20% decline in job performance, with another finding that 77% of layoff survivors see more errors and mistakes made. 📉 Another study found that layoffs tanked the quality of products, the safety of the workplace, and the quality of layoff survivor mental health and wellbeing. 📉 A bevy of other studies find a cascading set of issues triggered by layoffs that create a vicious cycle: worse morale and wellbeing leads to poorer job performance, overwork and forced productivity drives mass exoduses of skilled workers; reputational damage and loss of trust dampens the ability to hire fresh talent. Trying to achieve any sort of DEI impact amid this kind of avoidable chaos is like trying to renovate your house after setting it on fire. It's downright offensive to employees, especially those with marginalized identities, to be asked to continue their unpaid, voluntary efforts to benefit the business after you've destroyed any reason for them to undertake this extra work. It's a moot point—they're far too busy applying to your competitors, anyways. This is the point in time when those workplaces and leaders with empty promises and performative actions will be weeded out from those that get ahead by doing right by their people, their customers, and the world. There are many ways for a workplace to earn a spot in the latter group, but in case it wasn't clear? Mass layoffs aren't one of them.

For the last part of my Energy Resilience series, we have to talk about the worst-case scenario – when the lights actually go out. Earlier this year we saw that happen in Spain and Portugal. A major blackout left millions without power. Trains stopped, shops couldn’t take card payments, hospitals and factories switched to backup. A wake-up call that modern life depends on electricity in ways we often forget until it is gone.   This is what happens when grids are pushed to the edge by fast-moving disturbances or extreme conditions. A couple of years ago, South Australia experienced a state-wide blackout after severe weather took out multiple transmission lines. Investigations showed the system lacked enough inertia to stay stable through the shock. Part of the solution was to install synchronous condensers – giant flywheels that give the grid “weight” and stability. Siemens Energy delivered two of them as part of the response. Not the only measure of course – adapting regulation is also essential – but it showed something important: without resilience in the system, recovery is slow and uncertain. So what do we actually need if we want a fast ramp-up after a major incident? From my perspective, it comes down to three things. 1️⃣ Standardize before the crisis: When parts fail, every minute spent interpreting drawings or debating specifications is a minute the lights stay out. Standard equipment and uniform processes mean teams can move quickly because they are working with tools they already know. Recovery begins long before the fault happens. 2️⃣ Design power plants with failure in mind: A fast restart depends on assets built to recover quickly, not just run efficiently. That means black-start capability, smart redundancy where it matters and systems that can restart without waiting for the wider grid. In the U.S. for example we supported a power plant with a battery system that enables multiple restart attempts within one hour – resilience designed into the plant itself. 3️⃣ No improvisation in the dark: A blackout is the worst moment to negotiate who does what. Good restoration plans spell out which assets come back first, how to stabilize small sections of the grid and when to reconnect them safely. Regular drills with operators, authorities and major customers turn these plans into routine rather than theory. These steps matter because in any major incident skilled people are often the scarcest resource – grid operators, field crews and technical specialists. That is why preparation matters so much. Clear roles, common standards and trusted partnerships mean limited teams can do more in less time. Because when the worst happens what people remember is how long it stayed dark. I hope you have found this mini-series useful. I know social media is often about speed and short takes but sometimes – especially on important topics like this – I find it worthwhile digging into the detail together.✍️ I’d be interested to hear if you agree.

“Tariffs would only affect imported wine. I’ll just buy American.” WRONG! American wine depends on global parts: Cork → Portugal Barrels → France Machinery → Italy Bottles → China You can’t untangle a system like that overnight.🧵 Cork comes from cork oak trees. Over 80% of it is harvested in Portugal and Spain. There are no commercial cork forests in the U.S. Even if you planted one tomorrow, you’d be waiting 25+ years before it could be harvested. Barrels are a winemaker’s spice rack. French oak: tight grain, adds structure and spice American oak: broader grain, gives sweetness and coconut Hungarian oak: earthier, more restrained You can’t just swap one for another— and even if you wanted to, the trees they’re made from take 80–120 years to grow. Most winemaking equipment comes from Europe—especially Italy. Presses, bottling lines, destemmers—tools perfected over generations of winemakers. You could build more factories here. But the highest-quality tools will still be made abroad. By 2018, China was producing around 75% of the bottles used in American wine. Glass is heavy, energy-intensive, and slow to scale. China had the capacity. The U.S. relied on it. Then 25% tariffs hit. Chinese bottle imports dropped 55% in a year. The U.S. never recovered full capacity. Most bottles now come from O-I and Ardagh, but lead times are long and prices are up. Tariffs are set to rise again in 2025. Capacity is still being built out—seven years after the first shock. You can grow the grapes here. You can ferment them here. But if you want to bottle that wine, you’ll need cork from Portugal, glass from China, and barrels from trees planted in another century. That’s the global backbone of American wine. If you found this helpful, please give my first post a like or retweet so the algorithm gods will look down on me, smiling Seems like the China tariffs are still on, so lets look at the parallels from what happened in 2018 a little closer tomorrow.

A 200% tariff on European wines? That's going to make *American* wines more expensive, too. I'll put on my wine-lover's hat to explain why, and also how this relates to eggs and oil.... If European wines suddenly cost much more for American buyers, then American buyers will try to find substitutes. The demand for wine from other countries, including the United States, will increase. But the extra demand will just drive up prices for these wines as well. This is because the supply of wine can't change very much in the short term. It usually takes three years for new plantings of vines to produce suitable grapes, and then you need more time for production – especially if the wine is going to age in the barrel and/or the bottle. The same kind of problem is keeping egg prices high; it can take seven or eight generations of chickens to erase the effects of a disease outbreak on the chicken population. With little change in supply, all of the increase in demand will translate into higher prices. It will be especially hard for American producers to supply more wine, since the most popular areas for growing grapes are already being densely farmed. Could higher prices encourage wineries to begin producing in areas that were previously too costly? While oil prices were high in the 2000s and 2010s, crude oil production from costly sources like sands and shale increased. But after oil prices dropped, many of these investments no longer made economic sense. The same thing could happen to wine production if the 200% tariffs were lifted and prices returned to normal. So uncertainty about tariffs could deter such investment. With the tariffs in place, the main option for American wine producers will be to export less and sell more domestically (doubly so if Europe imposes reciprocal tariffs). Yet they already sell 88% of their wine here, so their flexibility will be limited. By contrast, producers in places like Argentina, Chile, Australia, and South Africa will be able to shift much more of their wine to the American market, both from domestic consumption and from exports to other countries. They – and maybe breweries – stand to be the real winners here. Salud! 🍷 #wine #tariffs #winetariffs [Photo: Geoffrey Fairchild via Creative Commons]

On the day the UN Security Council received an expert report on the escalating conflict in eastern DRC and the involvement of Rwandan troops, the U.S. Department of State issued a strong statement of concern related to the flow of critical #minerals from eastern DRC into neighbouring countries and into global supply chains for #tech, #autos and various other #industries. It also warns of the financing of the conflict from these minerals. #DRC is the world's leading producer of Tantalum which the US and others define as a critical mineral. I had the opportunity to visit Goma in May, during which the mine producing 30% of the world's output just to the west of Goma was taken by the Rwandan backed M23 rebels. The US Department of State statement is critical of the 'flawed industry-led traceability initiatives in the region' and focusses on advising the private sector of the risks to supply chains. It is worth noting that this is carefully worded to note '...the United States government recognizes that some industrially-mined and artisanally-mined gold, tin, and tantalum from the region may meet standards applied by various due diligence frameworks.' As a result the US calls for 'More refiners, processors, smelters and end user companies could enhance their due diligence work and invest in upstream efforts to ensure U.S. and other midstream and downstream companies are not sourcing minerals that finance conflict or contribute to human and labor rights abuses, whether directly from the region, including neighboring countries, or from smelters or refineries in countries that continue to accept such conflict-affected minerals.' There is reference to the OECD - OCDE Guidance which: '...suggests that the private sector go beyond purely “desk-based” due diligence and supply chain mapping, avoid disengaging from the region, and instead undertake heightened due diligence and active roles with onsite investigations (including in trading and refining hubs), continuous vetting, review of grievance mechanisms, remediation, and reporting performance.' This is an important distinction and calls on us all to lean in. Ultimately, we need to see de-escalation between governments and their proxies as well efforts towards peace. I know there are brave members of the local Churches in Goma working together in support of that objective. https://lnkd.in/etG7iKqZ

Although it's a bit early to speculate, it's clear that #Trump's reciprocal tariffs create unequal competitive advantages among major #shrimp suppliers to the #USA. In this Shrimp Byte, I provide an overview of combined AD, CVD, and #Reciprocal #Tariffs for countries that supply shrimp to the US. Here are just a few first thoughts to consider about the impact of tariffs on the competitive landscape within the US shrimp market:  - It’s unclear how tariff negotiations will unfold. One central question is whether negotiations will reduce universal tariffs or result in a shift from universal to commodity-based tariffs. - If tariffs remain unchanged, Ecuador and several smaller producers such as Argentina, Honduras, Mexico, Guatemala, Peru, and Saudi Arabia have a competitive advantage over most Asian countries. They may take advantage of the situation and gain market share. - India is relatively advantageous in Asia compared to other major suppliers such as Indonesia, Thailand, and Vietnam. It may aim to take market share in product segments that Latin American producers are not ready to supply. Indonesia, Vietnam, and Thailand will face difficult times regarding their US business. - Smaller Asian suppliers such as Bangladesh and Sri Lanka are even more severely affected and will likely have difficulty continuing business with the US. - Domestic shrimp farmers and fishers in the US may increase production and market shares as they will be much more competitive than before. However, they are unlikely to replace much of the total shrimp consumption as many production constraints are beyond price competitiveness. - As it is likely that shrimp prices in the US will increase if tariffs remain in place, what will be the impact on consumption? How price sensitive is shrimp consumption? What proteins will consumers shift to if shrimp becomes too expensive? What will this mean for overall shrimp consumption in the US? Angel Rubio at Urner Barry will have lots to say about this. Read the whole byte: https://lnkd.in/ehHEBxCU Subscribe to Shrimp Insights: https://lnkd.in/dTwgBvzM Shrimp Bytes deliver insights into the shrimp industry in a ready-to-eat, easy-to-digest form. Thank you to our partners for making it possible: Bioiberica, dsm-firmenich Animal Nutrition & Health, Fisherman's Choice, I&V Bio group, INVE Aquaculture, Megasupply, OMARSA S.A., Shrimp Welfare Project, The Waterbase Limited, Wanaka Seafood

The day after: with election uncertainty behind us, investors will focus on future clarity on policy priorities and implementation vs. what was proposed. 5 quick takeaways from me, David Kelly and Stephanie Aliaga: 1. A Republican controlled Congress increases the potential for significant policy changes, including tax cuts, deregulation and higher tariffs. The size of the Republican majority in both chambers will be key, as will Trump’s own priorities once in office. 2. U.S. equities remain supported, particularly on the back of robust growth and broadening earnings. However, risks around higher long-end yields and tariff implications don’t seem to be reflected in market prices and could generate volatility ahead. 3. At times, policy and market returns can take diverging directions. The performance of the Energy Sector and Clean Energy under the Trump and Biden administrations are a great example (see chart below). There's more to stock returns than politics and policy - macro context, global commodity prices, interest rates, risk appetite, and starting valuations matter more over a longer stretch of time. 4. Bond yields likely to remain volatile and elevated on the back of fiscal concerns, while trade uncertainties contribute to dollar strength and FX volatility. 5. Markets can thrive under various government configurations and diversification can help balance portfolios against unknown risks. #markets #economy #election

🔥 A ₹350 Restaurant Bill. The Farmer Who Grew Your Meal Gets ₹7. Read that again. I sat down for lunch at a Restaurant today. And as an Agriculture Officer, I couldn’t stop doing the math. Here’s where your ₹350 actually goes: → Real Estate & Ambience: 30% → Staff & Service: 25% → Middlemen & Transport: 20% → Restaurant Profit: 20% → Raw Material (Farmer): 5% (₹18) But here’s the painful truth: That ₹18 is NOT the farmer’s profit. After seeds, fertilizer, labour and irrigation, the farmer’s actual take-home is: 👉 ₹7–₹12. That’s 2% of your bill. And here’s the part most people don’t know: There is NO Minimum Support Price (MSP) for vegetables. If paddy or wheat prices drop, the government procures. But if tomatoes crash to ₹2/kg (which happens every year), the farmer absorbs 100% of the loss. The risk is fully on the creator. The margins are with everyone else. --- The brutal comparison: A food delivery rider earns ₹40–50 per order. A waiter in my city earns ₹400–600/day. A farmer earns ₹200–350/day after input costs. We talk about “doubling farmer income.” But if 95% of the value chain is extracted before the money reaches the farmgate, no scheme can fix this. --- So next time you see headlines like: “Farm-to-fork startup raises $10M” “AgriTech platform eliminates middlemen” Ask one simple question: “What % of the consumer’s payment reaches the farmer within 48 hours?” If they can’t answer with data, they’re not fixing the problem — they’re just taking a new cut from the same old 95%. --- The person refilling your water glass has more income security than the person who grew your food. This is the math. This is the reality. And this is why so many farmers left agriculture in India last year. --- What’s YOUR solution to fixing this value chain? 👇 #Agriculture #FarmEconomics #PolicyFailure #ValueChain #IndianFarming #MSP #LinkedInAgriculture

🧨 When Risk Becomes Uninsurable, Capitalism Breaks We often think of economic transitions as controlled, strategic processes — planned in boardrooms, debated in policy circles, executed through gradual shifts in capital and regulation. But the reality playing out today looks very different. In my recent op-ed, I argued that we are not on track for a smooth transition to a sustainable economy. We are instead headed for a disorderly one — where capital continues flowing into high-risk, high-carbon sectors until reality forces an abrupt and destabilizing correction. 📄 https://lnkd.in/eYqu_dqF This week, Allianz — one of the world’s largest insurers — offered a striking example of how that dynamic is already unfolding. Günther Thallinger, a member of the board, issued a warning that can’t be dismissed as alarmist: climate risk is becoming uninsurable. Entire regions are being abandoned by insurers because the probability of loss is simply too high. The models no longer hold. The premiums no longer cover the risk. The foundation cracks. That shift isn’t just a challenge for homeowners or property developers. It signals a much broader unraveling. Because when insurance pulls out, mortgages follow. Without insurance, banks cannot lend. Without lending, property values collapse 📉. Investment dries up 💸. Entire local economies — built on the assumption of stable, insurable conditions — begin to falter. This is how a disorderly transition begins: not with a single market shock, but with a cascading withdrawal of financial functionality. And it starts in the sectors most exposed to physical climate impacts: housing, agriculture, infrastructure. 🌍 What happens when climate volatility makes large parts of these sectors financially unviable? What’s especially sobering is that insurance is supposed to be the frontline of risk management. If the frontline is walking away, we should be asking hard questions about what remains behind it. Because insurance doesn’t just price risk — it enables credit, underpins investment, and stabilizes entire markets. Without it, the financial system loses one of its key mechanisms for converting uncertainty into confidence. Allianz’s warning is a live signal from within the system that the costs of inaction are materializing — and they are not linear 📛. They come in tipping points and sudden repricings, in the evaporation of insurability and the collapse of assumptions that markets have long treated as fixed. The transition is no longer ahead of us. It’s happening — unevenly, unpredictably, and increasingly outside the bounds of conventional financial logic. 📖 You can read the full article here: https://lnkd.in/eYUDttpw #ClimateRisk #SustainableFinance #SystemicRisk #ESG #Sustainability