[Jesse Schreger] ``A big question here is, how much can you ask of your own firms? In competing with China, a US concern has been limiting Beijing’s access to cutting-edge semiconductors because of the military role. So, the US enacted export controls and would try to block, say, Nvidia, from selling such semiconductors to China. But there’s a limit to how much they could ask firms to do. They’d say, ‘Here’s the threshold above which chips can’t be sent.’ Yet, a firm could appear to make a chip that was just below the threshold — it’s easy for China to combine those and still compete. One of the trade-offs the US faces now is the more it would like to limit the ability of its own firms to do business with China, the more it cuts into these companies’ profit margins. How much pain can you ask your businesses to take — particularly if they are profit-maximising entities which have a choice of where to locate? Sometimes, the cost of outward power projection is making your own economy potentially worse.”

”Just after Trump spoke, a trio of American economists — Christopher Clayton, Matteo Maggiori and Jesse Schreger —  released a paper outlining the growing field of ‘geoeconomics’, inspired by Hirschman…

This work has already produced three themes that investors should pay attention to. First, and most obviously, the trio’s analysis shows that it is dangerous for small countries to become too dependent on any large trading partner, and they offer tools to measure such vulnerability.”

“Jesse Schreger, an economist at Columbia Business School whose work Miran cites, said the concept of a new currency accord is difficult to reconcile with the punishment Trump has inflicted on Mexico and Canada…

‘There’s a fundamental coherence to this. There is a plan laid out here. And because everyone is grasping for what is Trump doing, this is the document people are reading,’ Schreger said. ‘But the problem is it’s not what the president is implementing. There’s nothing in there that says we should start by going after Canada and Mexico. Instead, the document emphasizes building a coalition to coordinate trade efforts against China.’”

“Indeed, this is probably the only sensible thing for most countries to do, according to the Global Capital Allocation Project (a research site on hegemonic economic power that is replete with handy charts showing which countries are most vulnerable to American and Chinese hegemonic power). Diversifying inputs, this notes, is crucial if countries are to increase “economic security” in a capricious world.”

”After all, as a new report from the Global Capital Allocation Project (a joint hub between Stanford, Chicago and Columbia universities) notes, it is China that actually has hegemonic power over global manufacturing, via its dominance of many supply chains.

Where America does have hegemonic power, however, is in finance, via the dollar-based system. Or, as the GCAP says: ‘Since the US-led coalition controls a dominant share of global financial services, often exceeding 80 or 90 per cent in many countries, this near-total control of the global financial system enables the US coalition to frequently use finance as a tool of coercion.’”

”`We estimate that US geoeconomic power relies on financial services, while Chinese power relies on manufacturing,’ says Matteo Maggiori, an economist, in a new paper he has co-written on these hegemonic power politics.”