More on this in a webinar later today with Members of the European Parliament. Huge thanks to @diw.de and @tomasoduso.bsky.social for their support!

What’s a way out? Maintain trade commitments with FTA partners (e.g. Canada, Mexico, Japan, South Korea) and deepen these ties. Simulations show that this strategy offsets economic damages from a protracted tariff conflict with US and generates GDP gains across all EU members.

A hit to US production: 240 of the top 1000 EU exporter – US importer links are between affiliates of the *same* firm. Over half of these within-firm exports is in capital and intermediate goods—meaning the tariff wall can substantially drive up US production costs for MNCs.

Role of ‘superstars’: Just the top 1% of exporters drive >60% EU’s maritime exports to US. Bottom 75% account for less than 3%. Exports are therefore highly concentrated and shocks to these top firms can have cascading effects on the economy. This is a well-documented pattern for many countries.

The sheer scale of exposure from potential across-the-board tariff hikes: The US was EU’s top destination for goods exports in 2024. In maritime exports, that’s 1.85 million+ shipments spanning 220,000+ relationships between EU exporters and US importers.

Apparently Trump is pleased with the trade surplus US has with Australia. on.ft.com/4hwbNSm

And we need to hear much more from governments on how they plan to react on services — as a crucial bargaining chip in this trade war and important driver of future growth.

Part of that strategy should be to coordinate closely against US trade threats. From the Russia sanctions experience, we know such coordination lowers the domestic costs of imposing punitive trade measures. (3/3)

It’s so urgent now to formulate a systematic response to unprecedented US disengagement on trade and multilateralism over the next years - going beyond scenario by scenario reactions to new tariff hikes. (2/3)

Overall, this firm-level data shows invoicing decisions are sticky for the majority and USD dominance is difficult to challenge. Something to note for central bank policies more broadly, especially those aiming to promote emerging currencies in global trade.

Longer thread to follow soon, but over the initial years of these reforms (2011-2017), RMB use grew substantially in French exports to China but was driven entirely by *very few*, very large, multi-product exporters. Plus, nobody uses the RMB as a vehicle currency to export to third markets.

Fantastic and congratulations! 🚀