Recommended Weekend Reads
Is Trade Uncertainty Boosting Automation? Putin’s Fear of Economic Humiliation, American Soybean Farmers Feeling the Pain of China’s Boycott, And How Geopolitical Risk Impacts Consumer Spending
September 5 - 7, 2025
Each week, we gather up the best research and reports we have read in the past week and pass them on to you. Below is this week’s curated collection. We hope you find them interesting and informative, and that you have a great weekend.
Geoeconomics & Trade
Will Trade Uncertainty Boost Automation? Federal Reserve Bank of San Francisco
Recent surges in trade policy uncertainty highlight the fragility of global supply chains, prompting businesses to consider reshoring—moving production from abroad to domestic locations. Reshoring can be costly, creating incentives for businesses to automate. Evidence suggests that businesses facing heightened trade policy uncertainty in industries more exposed to international trade reshore more and automate more than those that are less exposed to trade. Automation appears to help mitigate the otherwise negative effects of trade policy uncertainty on production and labor productivity.
In Tariff Standoff with Trump, China Boycotts American Soybeans New York Times
China has rare earth metals. The United States and Brazil have soybeans. For all the chokeholds China maintains on global supply chains, it is overwhelmingly dependent on soybeans from other parts of the world. China imports three-fifths of all the soybeans traded on international markets. Now with China and the United States locked in a tense standoff over tariffs, soybeans have emerged as a central dispute between the trading partners. China has been boycotting purchases of U.S. soybeans since late May to show displeasure with President Trump’s imposition of tariffs on imports from China. The pain is being felt in Midwest states, especially Illinois, Iowa, Minnesota and Indiana. For the first time in many years, American farmers are preparing to harvest their crop this fall with no purchase orders from China.
Effects of Tariff Uncertainty on the Outlook of Small and Medium-sized Businesses Federal Reserve Bank of Boston
A large body of research demonstrates that uncertainty affects many dimensions of firms’ decisions, from investment and hiring to pricing and profitability. To gain a better understanding of how uncertainty induced by shifting trade policy shapes the behavior of small and medium-sized businesses (SMBs) the authors surveyed decision-makers at SMBs. Key Takeaways include:
Results from the survey indicate that uncertainty about tariffs rose markedly from the first wave to the third for all SMBs, and especially for importers.
Survey respondents with greater uncertainty about tariffs in April 2025 – and especially those that import – tended to report greater uncertainty about business operations, particularly about investment and worker head count.
The respondents indicated that a hypothetical reduction in business uncertainty would improve their expectations, but another increase in business uncertainty would not lead to further deterioration in their outlook.
The muted reaction to a hypothetical increase in business uncertainty suggests that by April 2025, the effect of increased uncertainty on SMBs’ expectations may have already peaked and/or that financial conditions had not tightened enough to notably amplify any negative real effects of further increases in uncertainty.
The Fiscal Impact of Immigration: An Update AEI Economic Perspectives
Immigrants have an overall positive fiscal impact on the US—an effect driven by high-skilled
immigrants. Low-skilled immigrants, like their US-born counterparts, impose a net fiscal cost.
However, recent studies show that the indirect fiscal effects of low-skilled immigration are positive,
partly offsetting the negative direct fiscal impact. Moreover, immigrants will help bear the cost
of future policy changes required to address the growing national debt. Smaller immigration
inflows might reduce fiscal pressure on state and local governments, but would increase fiscal
pressure on the federal government and slow economic growth.
The Impact of Geopolitical Risk on Consumer Expectations and Spending Yuriy Gorodnichenko, Dimitris Georgarakos, Geoff Kenny, and Olivier Coibion / NBER
Abstract: Using novel scenario-based survey questions that randomize the expected duration of the Russian invasion of Ukraine and Middle East conflict, we examine the causal impact of geopolitical risk on consumers’ beliefs about aggregate economic conditions and their own financial outlook. Expecting a longer conflict leads European households to anticipate a worsening of the aggregate economy, with higher inflation, lower economic growth, and lower stock prices. They also perceive negative fiscal implications, anticipating higher government debt and higher taxes. Ultimately, households view the geopolitical conflict as making them worse off financially and it leads them to reduce their consumption.
Russia’s Struggling Economy
Can Russia Weather a Fuel Crisis Caused by Ukrainian Drone Attacks? Carnegie Politika
Once again, Russia is in the grips of a gasoline crisis. Prices at the pump are rising, and some gas stations have run dry. This isn’t the first time Russia has experienced such shortages, but this time around they could be more serious because of the ongoing war in Ukraine. There were gasoline crises in Russia both before the full-scale invasion (in 2011,2018, and 2021), and afterward (in 2023). Despite a 2024 Ukrainian drone campaign targeting Russian refineries, the fuel market remained relatively calm. Back then, each refinery was only hit by a single drone, reducing plant capacity but leaving it operational. The damage was dealt with in a matter of weeks, consecutive attacks, were rare and often deflected, and neighboring plants continued to operate without interruption. Ultimately, the 2024 drone attacks caused inconvenience and expense for the Russian oil industry, but did not present a major problem. This time could be quite different.
Putin’s Fear of a Humiliating Economic Crisis Foreign Policy
Russian President Vladimir Putin has every reason to seek a lifeline for the Russian economy. In recent weeks, a flurry of signs has shown Russia’s war-drained, sanctions-constrained economy to be at an inflection point. For the first time since the start of the war, nonmilitary economic activity has been contracting, bankers are making plans to weather a financial crisis, and energy firms are worrying about losing their largest customer for seaborne oil exports. Putin’s intensifying economic troubles have important implications for Western policymakers as they begin negotiating with Moscow about the future of Ukraine. Unlike the impression the Russian leader tries to make, time is far from being on his side. In fact, economic pressure remains the best leverage that Ukraine’s supporters have over the Kremlin. It remains to be seen whether Europe and the United States will choose to play the economic ace they still have up their sleeves.
The Global Race for Critical Minerals
Why Is Renewing AGOA Strategic for U.S.-Africa Minerals Diplomacy? Center for Strategic and International Studies
The African Growth and Opportunity Act (AGOA), first signed into law by President Bill Clinton in 2000, is a unilateral U.S. trade preference program set to expire in September 2025. Its pending reauthorization has sparked debate over whether—and how—it should be extended and reformed. A failure to extend AGOA could have larger ramifications at a time when the United States is doubling down on its commercial diplomacy—and more specifically, its mineral diplomacy efforts—with Africa.
Europe’s Strategic Access to Battery Minerals in a Changing Geoeconomic Landscape The Hague Centre for Strategic Studies
Europe’s transition to a low-carbon economy hinges on the rapid deployment of battery technologies. Batteries are essential for stabilizing electricity grids powered by renewables and for enabling the shift from internal combustion engine (ICE) cars to electric vehicles (EV), especially after the European Union’s (EU) 2035 ban on new ICE cars. The successful deployment of batteries in Europe depends on secure supply chains, which are heavily concentrated. China plays a dominant role across the entire battery supply chain. It produces most of the world’s batteries and controls large shares of battery material mining and processing capacity, including graphite, lithium, manganese and phosphate. The Chinese government can use its control over battery supply chains to exert geopolitical pressure on other countries. To reduce its vulnerability, Europe could choose to look into types of batteries that rely less on raw materials whose supply chain is dominated by China.