VoxTalks Economics

China cannot sell as much as it used to in the United States. That trade has to go somewhere, and somewhere might be Europe.
In this week's VoxTalk, Tim Phillips asks Pol Antràs (Harvard) and Beata Javorcik (EBRD, Oxford) what this means for European producers and consumers.
Antràs and Andrea Presbitero have mapped which countries and sectors face the sharpest competition from redirected Chinese exports, and which stand to gain. Does cheap Chinese tech ease Europe's energy cost crisis, or squeeze European manufacturers of wind turbines and electric cars?
If Europe decides to take the gains where consumers and firms can get them, and compensate the producers who are legitimately hurt, how do they go about it? And can raising tariffs in a world of global value chains protecting one sector without damaging others?
New episode, recorded at the PSE-CEPR Policy Forum 2026 in Paris.
The research behind this episode:
Antràs, Pol, and Andrea F. Presbitero. 2026. "The Remains of the Trade: The U.S.-China Trade War and its Aftermath." Preliminary version
To cite this episode:
Phillips, Tim, Pol Antràs, and Beata Javorcik. 2026. "Europe in the Middle." VoxTalks Economics (podcast). 
About the guests:
Pol Antras is Robert G. Ory Professor of Economics at Harvard University, a Research Associate at the National Bureau of Economic Research, and a Research Affiliate at the Centre for Economic Policy Research. His research spans global value chains, the organisation of multinational firms, and, most recently, the intersection of trade policy and geopolitics.
Beata Javorcik is Chief Economist of the European Bank for Reconstruction and Development, on leave from her position as Professor of Economics at the University of Oxford and Fellow of All Souls College. She is Director of the International Trade Programme at the Centre for Economic Policy Research. Her research spans foreign direct investment, industrial policy, and, increasingly, the economics of geopolitical fragmentation.
Research cited in this episode:
The Great Reallocation is the term coined by Laura Alfaro and Davin Chor for the reorganisation of United States sourcing away from direct imports from China and toward alternative suppliers such as Vietnam, Mexico, and Taiwan. Antràs and Presbitero's paper extends this idea to third countries, showing that Chinese exports displaced from the American market are increasingly landing in Europe and Asia rather than disappearing.
Geopolitical externality is a concept developed by Laura Alfaro, Maggie Chen, and Beata Javorcik in their working paper "The Battle over Knowledge: Multinationals, Diffusion, and Governance." It describes how knowledge transferred abroad by multinational firms can strengthen a rival state's strategic capability in ways the firm never intended and the market never prices, which is why governments increasingly restrict flows of codified, tacit, and organisational knowledge that would once have passed unremarked.
Voluntary export restraints were the mechanism used to defuse the United States' trade conflict with Japanese carmakers in the 1980s. Rather than imposing tariffs, Japan agreed to limit its car exports, and Japanese manufacturers responded by building plants directly in the United States. Javorcik cites this as the precedent for how the current standoff over Chinese electric vehicles and knowledge transfer might eventually be resolved.
The Draghi report on European competitiveness, published by the European Commission in September 2024, recommended conditioning Chinese investment in the European electric vehicle sector on mandatory knowledge transfer. Javorcik notes the difficulty of calibrating such requirements: demand too little and Europe gains nothing from the technology; demand too much and Chinese investors have no reason to come at all.
"Industrial Policies for Multi-stage Production: The Battle for Battery-powered Vehicles," by Keith Head, Thierry Mayer, Marc Melitz, and Chenying Yang, models how tariffs and subsidies reshape the location of battery and vehicle assembly plants across a multi-stage supply chain. Antràs cites the paper's finding that protecting the electric vehicle sector through tariffs can produce worse outcomes than the problem it was meant to solve.
Export controls and innovation, discussed by Javorcik with reference to Chinese firms such as DeepSeek and Huawei, illustrate a pattern in which restricting a country's access to a technology, in this case advanced semiconductors, can accelerate that country's innovation in adjacent areas rather than simply constraining it. She draws a parallel with rare earth export restrictions, which have historically spurred substitute technologies rather than suppressing them.
More VoxTalks Economics episodes:
In a conversation recorded at the CEPR Annual Forum in Paris called "What should Europe do about Trump?" Tim Phillips spoke to Beatrice Weder di Mauro and Ugo Panizza of the Graduate Institute Geneva, about how Europe should respond to the second Trump administration's trade policies.
Listeners interested in how firms navigate geopolitical trade disruption should also hear "Trading around geopolitics," in which Giancarlo Corsetti, Banu Demir, and Beata Javorcik discuss how Turkish exporters filled the gap left by sanctions on Russia.
Related reading on VoxEU:
"An update on the great reallocation in US supply chain trade" uses detailed United States import data through 2025 to track the scope and pace of the reallocation discussed in this episode.
"From tariffs to trade flows: Diversion effects and China's exports to the EU" examines the evidence for and against the trade deflection story that Antras and Javorcik discuss, and finds the picture more mixed than a simple diversion narrative suggests.
"China shock 2.0 and the euro area: Cheaper imports, tougher competition" decomposes the recent surge in Chinese exports to the euro area and argues that structural forces within China, rather than diversion from the American market, explain most of it.
"The impact of trade wars on firms in third countries" proposes a model of how bilateral trade shocks spill over to bystander economies, applying it to Italian firms during the 2018 to 2019 trade war.

Episode recorded on 19 June 2026 at the PSE-CEPR Policy Forum in Paris.
Twice before, the world's savings and debts have piled up in the wrong places, and twice the imbalance broke something. The first time it took the Plaza Accord to fix it. The second time it took a global financial crisis.
Now we are in a third wave. Gita Gopinath (Harvard, former IMF Chief Economist and First Deputy Managing Director) and Philip Lane (European Central Bank, CEPR) join Tim Phillips to ask what is different this time.
Household and bank balance sheets are stronger than before 2008. But the fragility has moved to governments carrying much higher debt, and to non-bank financial institutions whose exposures and links to banks are only partly visible. Foreign investors hold US$40.7 trillion of US equities, 44% of world GDP outside the US, much of it riding on the AI boom.
Lane's overriding principle: central banks can calm bond markets under stress, but they must be just as clear about what they will not do if debt is unsustainable.
The research behind this episode:
Bai, Chong-En, Gita Gopinath, Hélène Rey, and Axel Weber. 2026. "G7 Economists Memo on Global Imbalances." Prepared for the French Presidency of the G7, 28 March.
The panel also draws on the fourth CEPR/Bruegel Paris Report, Paris Report 4: The New Global Imbalances, edited by Hélène Rey, Beatrice Weder di Mauro and Jeromin Zettelmeyer (CEPR Press and Bruegel, 2026), free to download at cepr.org.
Gopinath made the keynote presentation “The Third Wave: Addressing Global Imbalances” on 19 June at PSE.
To cite this episode:
Phillips, Tim, Gita Gopinath, and Philip Lane. 2026. "Addressing Global Imbalances." VoxTalks Economics (podcast). 

About the guests

Gita Gopinath is the Gregory and Ania Coffey Professor of Economics at Harvard University, where her research spans international finance and macroeconomics, dollar dominance, exchange rates and sovereign debt. She was First Deputy Managing Director of the International Monetary Fund from 2022 to 2025, and the Fund's Chief Economist from 2019 to 2022. 
Philip Lane is Chief Economist and a member of the Executive Board of the European Central Bank, and a Fellow of CEPR's International Macroeconomics and Finance programme. He was Governor of the Central Bank of Ireland from 2015 to 2019, and remains an honorary professor of economics at Trinity College Dublin, where his research covered financial globalisation and European monetary integration.
Research cited in this episode

The three waves of global imbalances. Gopinath frames today's imbalances as the third episode since the 1970s in which national savings and investment have pulled badly out of line, a framing she titled "The Third Wave" in her Atlanta Fed presentation. The first, in the early 1980s, produced the 1985 Plaza Accord, when the US and its G5 partners agreed to talk the dollar down after years of a strong currency and a widening trade deficit. The second built through the 2000s and unwound in the 2008 global financial crisis. In both, the US was the deficit country; the surplus moved from Japan to China.
Foreign holdings of US equities. Gross foreign holdings of US equities stood at US$40.7 trillion, 44% of world GDP excluding the US (Gopinath 2026, citing US Treasury data). Gopinath's slides show 54% of gross foreign inflows into US government debt since 2007 and estimate that 61% of the deterioration in the US net international investment position since the global financial crisis has been driven by valuation effects rather than trade deficits.
Non-bank financial institutions (NBFIs). Hedge funds, private credit funds, insurers and other institutions outside the regulated banking system now intermediate a large and growing share of global finance. Gopinath's slides show leveraged intermediation migrating from households and banks before the 2008 crisis toward government and non-bank financial institutions today, echoing the concerns set out in the G7 memo and the CEPR Paris Report.
The 2020 "dash for cash." In March 2020, US Treasury yields rose sharply even as investors would normally be expected to flee to safety, a sign that market functioning, not just prices, can break down under stress. Gopinath cites the episode as evidence that hedge funds, now bigger players in Treasury market-making, can amplify rather than absorb shocks.
ECB crisis tools: PEPP, OMT and TPI. Lane describes three instruments built since 2012 to separate monetary policy from market functioning: the Outright Monetary Transactions programme (2012), designed to backstop governments already in an ESM assistance programme; the Pandemic Emergency Purchase Programme (2020), the ECB's flexible, country-varying response to Covid-19; and the Transmission Protection Instrument (2022), intended to calm unwarranted bond market panic without financing unsustainable debt.
US federal debt and the fiscal deficit. Gopinath's slides put federal debt at 108% of GDP in 2025, up from 41% in 2007 and 39% in 2000 (source: Federal Reserve, FRED). In conversation she cites the US fiscal deficit at close to 7% of GDP, at a point in the cycle when the economy is strong. Note this is federal debt specifically; the G7 memo cites a broader measure, US general government debt, at around 120% of GDP, projected to reach around 140% by 2031. The two figures are not directly comparable and should not be conflated in the notes or on air.
More VoxTalks Economics episodes

This episode sits alongside three earlier VoxTalks Economics conversations built around the CEPR/Bruegel Paris Report 4, The New Global Imbalances.
Global Imbalances Redux, in which Maurice Obstfeld sets out the history of the three waves of imbalances and what today's policymakers can learn from how the first two were resolved.
Rebalancing the Chinese Economy, in which Yiping Huang explains why decades of investment-led growth suppressed Chinese household consumption, and what it would take to reverse that.
Stablecoins and Global Imbalances, in which Gilles Moec examines how dollar-backed stablecoins help fund the US deficit, and the regulatory gaps that leaves behind.
Related reading on VoxEU

Why global imbalances matter again, and what to do about them, a VoxEU column drawn from Chapter 1 of Paris Report 4, setting out why imbalances have widened since 2018 and the risks of a disorderly unwind.
Industrial policy, tariffs, and the return of global imbalances, which finds that tariffs are a weak tool for correcting current account imbalances and that industrial policy's effects run mainly through its impact on domestic saving and consumption.

Lose your job at 25 and someone will help you find another. Lose it at 55 and the talk quietly turns to how you might wind down towards retirement.
Policymakers tend to assume job search training works for the young and not the old, so they rarely spend money trying. Bas van der Klaauw (Tinbergen Institute) thinks they got that wrong.
In this week's VoxTalks Economics, he tells Tim Phillips about a Dutch experiment that put older unemployed workers through an intensive programme built on one idea: teach people over 50 to find work the way younger workers already do, by working their social network.
Participants left unemployment faster, there was a 10% increase in job finding, and the savings in benefits more than covered the cost. The catch: it helped the better educated most and was tested in a recession. Will it work just as well in today's labour market, where even the young and well-educated are struggling to find good jobs?
The research behind this episode:
de Groot, Nynke, and Bas van der Klaauw. 2026. "A Randomized Experiment on Improving Job Search Skills of Older Unemployed Workers." CEPR Discussion Paper 21464. (Gated)
To cite this episode:
Phillips, Tim, and Bas van der Klaauw. 2026. “Helping the over-50s find work.” VoxTalks Economics (podcast). 

About the guest

Bas van der Klaauw is professor of economics at Vrije Universiteit Amsterdam and director of the Tinbergen Institute. An applied microeconometrician, he uses causal methods to study labour markets, education and health, and is a research fellow of CEPR and IZA. His work on unemployment insurance, active labour market programmes and job search includes several field experiments run with the Dutch benefits administration.
The paper is co-authored with Nynke de Groot, an economist at the National Health Care Institute (Zorginstituut Nederland) who took her PhD at Vrije Universiteit Amsterdam. Her earlier work with van der Klaauw includes a study of how cutting the unemployment insurance entitlement period affects job finding.
Research and concepts discussed in this episode

Older workers and long-term unemployment. Older unemployed workers tend to have job finding rates around half those of younger workers, and during the recession the study covers, more than half of older job seekers risked becoming long-term unemployed. Van der Klaauw attributes the gap to a combination of factors rather than any single cause: more generous and longer benefit entitlements that weaken the incentive to take a lower-paid job quickly, and employers who favour younger hires expected to grow with the firm over a longer horizon.
STEP (Successfully to Employment Program). A Dutch job search assistance programme developed during the post-2008 recession for unemployed workers aged 50 and above who had not found work within a few months of claiming unemployment insurance. It ran to 10 group sessions of around four hours each plus two individual meetings, covering interview practice, CV writing and social media, with a particular emphasis on activating the participant's social network. Participants were encouraged to have at least one conversation a week with a contact about possible work. The programme cost roughly 470 euros per participant.
The experiment. The study covers everyone aged 50 to 63 who entered unemployment insurance in the Netherlands between November 2014 and July 2015 and remained unemployed for three months, about 50,000 people. Assignment to treatment or control was based on the last digit of the social security number, putting roughly 20% in the control group. Because participation was voluntary (an encouragement design), the authors report both the effect of being offered the programme and, using random assignment as an instrument, the effect of actually taking part. Around 54% of those in the treatment group took up STEP.
What it did to job search behaviour. The job application register lets the authors watch how people searched. Participants made fewer applications to posted vacancies and did more networking, exactly the shift the programme was designed to produce. The change in method did not raise the number of job interviews, but it was accompanied by faster exits from unemployment.
Cost effectiveness. Participation cut cumulative benefit payments by about 715 euros within 18 months, comfortably above the 470 euro cost, making STEP cost effective for the benefits administration. For participants, the lost benefits were almost fully offset by higher earnings from working sooner, so there was no large income gain to the individual, but no loss either.
Who it helped. Effects were strongest for the better educated, those with higher pre-unemployment earnings and those not previously working through a temporary work agency. There was little or no effect on the lowest educated, who also had the lowest take-up. The authors find no significant difference by gender or by age band within the 50 to 63 range.
Trainers and group composition. Effectiveness varied significantly across trainers, but no observed characteristic (gender, age, experience, contract type) explained which trainers did better. Group composition mattered too: participants did better when their group contained some lower-educated members, which argues for mixed rather than streamed training groups. One reading is that trainers may concentrate their attention on the more employable members of a group.
Does it generalise? Two caveats. The programme was evaluated in a recession, when people were losing jobs through no fault of their own (frictional unemployment), and it may do less when work is easier to find. And it was designed for that kind of unemployment, not for the structural problem of workers whose skills no longer match available jobs, where van der Klaauw suggests training or retraining, rather than job search help, is the relevant tool.

Who kept the courts sitting and the streetlights lit when the state had almost no money to pay anyone?
Two hundred years ago, British local government ran on unpaid labour. In a parliamentary survey of the boroughs from 1835, two in three of the people doing local government work were not paid at all.
James Robinson (University of Chicago, CEPR) explains how this succeeded in this week's episode of VoxTalks Economics. Robinson and his co-authors call this the "embedded state". Members of the elite willingly took the unpaid jobs because the postings carried prestige and led to Parliament, promotion or a paid post. Less glamorous or dead-end postings -- the jailer for example -- had to be paid
But the unpaid officers were more productive than the paid ones.
Robinson argues this is not a quirk of England at that time. Rwanda runs a high-capacity state today on much the same basis, without ever raising the taxes the IMF says a proper government needs. The lesson for anyone trying to make government work: start with the society, not the tax code.
New episode of VoxTalks Economics. Link in bio.
Image: William Benjamin Watkins by George Patten / Manchester Town Hall.
The research behind this episode:
Heldring, Leander, Davis Kedrosky, James A. Robinson, and Matthias Weigand. 2026. "The Success of the Embedded State in England." CEPR Discussion Paper No. 21460. Centre for Economic Policy Research, London. 
To cite this episode:
Phillips, Tim, and James A. Robinson. 2026. "The success of the embedded state." VoxTalks Economics (podcast). 

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About the guest

James A. Robinson is University Professor at the Harris School of Public Policy and the Department of Political Science, University of Chicago, and a Research Fellow at the Centre for Economic Policy Research. His research spans comparative political and economic development, state capacity, and the long-run relationship between institutions and prosperity, with fieldwork across sub-Saharan Africa and Latin America. He shared the 2024 Nobel Memorial Prize in Economic Sciences with Daron Acemoglu and Simon Johnson.
Research cited in this episode

The 1835 parliamentary report. After the 1832 Reform Act, Parliament sent lawyers to roughly three hundred of the largest boroughs to record who worked for each borough government, what they did, whether they were paid, how much, and how well the job was done. The commissioners graded public goods directly; whether a jail existed, and if so whether its condition was satisfactory. The 3,500-page report is the factual basis for the paper, and it survives because Parliament itself did not know how these idiosyncratic, often medieval borough governments worked.
The fiscal-military state. The dominant account of British state formation comes from John Brewer's The Sinews of Power (1989), which traces the rise of a tax-raising, salaried fiscal state after the Glorious Revolution of 1688. Robinson's point is that this describes 20,000 officials in London; across the rest of the country, where fiscal resources were thin, most government work was done for free.
Mark Goldie and the unpaid office-holder. The historian and political theorist Mark Goldie documented the scale of unpaid local office-holding in earlier work; Robinson and his co-authors took that observation and asked how to study it systematically, which led them to the 1835 report.
The embedded state. A state has high capacity when it can implement policy and provide public goods. The embedded state does this without the fiscal resources to fund a modern bureaucracy, by drawing on the social structure of the society it governs to motivate people to do government work unpaid. Because that social structure differs from place to place, embedding looks different in 1830s Britain, in modern Rwanda, and in 1970s South Korea; understanding the state means understanding the sociology beneath it.
Rwanda's state capacity. Robinson and Leander Heldring also study the organisation of the state in Rwanda, where most government workers are unpaid and the country has never raised the 15% of national income in taxes that the International Monetary Fund treats as the threshold for a functioning state, yet implements policy effectively.
Elinor Ostrom and the commons. Elinor Ostrom won the 2009 Nobel Memorial Prize for showing that communities can organise to provide and govern shared resources without the state. Robinson's argument is that the interface between such collective provision and the state is productive rather than antagonistic.
Somaliland and the Guurti. Somaliland has an elaborate clan structure, and its upper house, the Guurti, represents the clans. Robinson offers it as a case where anyone trying to improve public good provision should start from the existing social structure rather than from tax reform.
The History of British Local Government. Beatrice and Sidney Webb's nine-volume history of English local government documents the medieval charters, inherited land and bequests that determined how much fiscal capacity each borough had. That historically determined variation in whether a borough could afford to pay its officers is what the paper uses to identify the effect of pay on performance.
More VoxTalks Economics episodes

Nobel Special - James Robinson on antisocial norms. The saying “don’t be a toad” in Colombia tells people to mind their own business and not to tell on others. The warning that “snitches get stitches” is common to many societies. It’s easy to imagine why groups adopt prosocial norms like sharing and volunteering. But what sustains an “antisocial” norm?

Defence spending is rising whether voters like it or not. The UK has committed to 2.5% of national income and aims for nearer 3.5% over the next decade, £30bn a year for each percentage point. What does the country get back? Can defence spending be pro-growth?
In this week's VoxTalk, John Van Reenen (LSE) argues that getting a return on investment based on innovation need not be left to luck. For example nuclear power, GPS and the internet all began as military projects. The spillovers can be planned for; the trick is to make defence spending innovation-rich, and make procurement work better.
Traditional top-down procurement mostly produces lock-in: the same firms winning over and over. Van Reenen's study of a project at the US Air Force shows the difference: when it asked firms what they could build, rather than telling them what to make, the competitions brought in startups, generated more original patents, and spilled ideas into the civilian economy. 
The research behind this episode:
Moretti, Enrico, Claudia Steinwender, and John Van Reenen. 2025. "The Intellectual Spoils of War? Defense R&D, Productivity, and International Spillovers." The Review of Economics and Statistics 107 (1). An ungated version is available as NBER Working Paper No. 26483.
Howell, Sabrina T., Jason Rathje, John Van Reenen, and Jun Wong. 2025. "Opening Up Military Innovation: Causal Effects of Reforms to US Defense Research." Journal of Political Economy 133 (11). An ungated version is available as NBER Working Paper No. 28700.
To cite this episode:
Phillips, Tim, and John Van Reenen. 2026. “Making defence spending pay.” VoxTalks Economics (podcast).

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About the guest

John Van Reenen is the Ronald Coase School Professor at the London School of Economics and Director of the Programme on Innovation and Diffusion at the Centre for Economic Performance. He chairs the Council of Economic Advisors to the Chancellor of the Exchequer and is a Research Fellow of the Centre for Economic Policy Research and the NBER. His research spans innovation, productivity, industrial organisation, and the public policies that shape them.
Research cited in this episode

Crowding in, not crowding out. Moretti, Steinwender and Van Reenen tracked industries across twenty-three economies over several decades and found that higher defence R&D spending raised private R&D rather than displacing it, with knock-on gains for productivity growth in the following decades.
The SBIR Open Topics reform. The US Air Force Small Business Innovation Research programme traditionally ran "conventional" competitions specifying the technology wanted; from 2018 it added "open" competitions inviting firms to propose any idea useful to the Air Force. Howell, Rathje, Van Reenen and Wong compared near-winners with near-losers and found the open awards produced new military technology, more original patents, and civilian spillovers such as venture capital funding; the conventional awards mostly produced lock-in.
Spin-offs from military research. Nuclear power, GPS and the internet each began as military projects before becoming civilian technologies; Van Reenen reaches back further to the claw of Archimedes, built to fend off the Roman fleet at Syracuse, as an early example of defence invention finding a wider use.
The Draghi report. Van Reenen worked with Mario Draghi on his 2024 report on European competitiveness; he draws on it to argue that fragmented standards and duplicated procurement across Europe waste money, and that common standards and joint procurement would let countries specialise where they hold a comparative advantage.
More VoxTalks Economics episodes

In January, Tim spoke to Moritz Schularick of the Kiel Institute for the World Economy about whether Europe can convert its industrial base into credible deterrence. Listen to Can Europe Defend Itself?