Annual Report 2025

Letter from the President  

At a time defined by dramatic economic and geopolitical policy changes, the world needs an evidence-based, unbiased source of economic analysis more than ever. The Peterson Institute for International Economics proudly served that role again in 2025 as a nonpartisan provider of facts, insights, and practical solutions. Our scholars’ research helped policymakers and the interested public understand the economic issues of our time with policy advice grounded in unparalleled practical expertise. We will continue to do so in the years ahead, however the global economy and geopolitics evolve. 

In this spirit, I am pleased to present the Peterson Institute’s annual review of our scholars’ work and our public outreach on numerous critical policy issues.  

Global trade wars and rising economic costs   

Following President Donald Trump's unilateral "Liberation Day" tariff increases through executive orders on April 2, 2025, PIIE scholars provided real-time analysis of the costs to American consumers and businesses, resulting in record media citations. Since then, our scholars have assessed US tariff changes, revenue and investment claims, and legal challenges, as well as the impact on the economy of protracted policy uncertainty.  

Central bank independence and data integrity   

PIIE experts examined the institutional credibility and guardrails needed to ensure monetary policymakers can sustain low inflation and long-term economic stability. The Institute convened leading voices from academia, government, and finance to share insights at a high-level conference. Our scholars also identified issues with the key US data that inform economic policy, including estimates of job growth, employment, and immigration.  

US-China relations and China’s broader impact  

Increased tensions between the United States and China underscored the need for more work in one of PIIE’s core research areas. PIIE’s analysis of China’s economy examined the consequences of its slowing growth, state-driven industrial policy, and trade frictions for China and the global economy.   

The decentering of the dollar 

PIIE scholars examined the implications of major US policy shifts for the dollar’s role in global finance and the international economic system. Throughout the year, PIIE held high-level events and produced critical analysis on the changing dollar regime.  

The EU’s moves towards greater resilience and influence 

PIIE research examined whether and how the European Union can confront growing security threats, trade tensions, and fiscal constraints as the United States withdraws from its role as global insurance provider. This included identifying ways Europe could achieve financial autonomy through creating a deep and liquid Eurobond market as well as creative initiatives to finance military spending and aid. 

Crises in Argentina, wartime economies, and beyond 

Beyond the G7 and Chinese economies, PIIE scholars examined how economic policy choices play out under crisis conditions—such as Argentina’s recurring monetary turmoil, wartime economies in Russia and Ukraine, energy-market shocks, and financial vulnerabilities across Asia and the Middle East.  

As we look ahead to the remainder of 2026, PIIE scholars will continue working on these issues while also examining:  

• The effects of President Trump’s tariffs on consumers, businesses, and supply chains as Europe, China, Canada, India, and others forge new trade agreements in the rapidly changing world trading system.   

• The rapid advancement of artificial intelligence (AI)—particularly China's and the United States’ diverging and competing development of AI models—and its potential to reshape labor markets, productivity, and global competition.   

• How Europe can generate the stronger economic growth and business dynamism it needs to cover rising social and national security costs. 

• The implications for global imbalances—and international negotiations over them—of slowing growth, sticky deflation, and weak consumption in China, with the mirror image (accelerating growth and inflation, resilient consumption growth) characterizing the US economy, with ramifications for exchange rates. 

• Renegotiation of the US-Mexico-Canada trade agreement, focusing on areas of dispute such as energy, auto rules of origin, and lumber. How much can US pressure bilaterally on Canada and Mexico result in the parties strengthening or revoking this important accord?  

• The economic effects of new US barriers to immigration including on the labor market, GDP growth, and productivity gains. 

As always, I express my sincere appreciation to each of our stakeholders and supporters—including philanthropic individuals, private-sector corporations, foundations, and government institutions—without whom we could not continue our crucial work during these uncertain times. 

Sincerely,

Adam S. Posen
President | Peterson Institute for International Economics

Central bank independence 
PIIE experts stressed the importance of protecting the Federal Reserve from political interference with a notable high-level conference and writings across outlets. The conference drew over 1,100 attendees, drawing bipartisan participation, the presence of Federal Open Market Committee members, and coverage in the Financial Times, with presentations published in a PIIE Briefing. 

David Wilcox published a paper that traced Congress’ efforts in 1935 to rewrite the institutional structure of the Fed, which was cited in several court filings related to Trump’s efforts to fire Federal Reserve governor Lisa Cook. Jason Furman wrote in the New York Times that protecting Fed independence after Cook's firing would require efforts by the Supreme Court, the Senate, and the Fed itself. Maurice Obstfeld spoke on the topic with Central Banking, Patrick Honohan published an op-ed for Economic Sociology & Political Economy, and Wilcox reflected on Jerome Powell's remarks at the Jackson Hole symposium. 

Macroeconomics 
Olivier Blanchard researched convergence in terms of methodology, architecture, and main mechanisms in macroeconomics. Blanchard also argued that—given the limits on monetary policy—fiscal policy coupled with quasi-automatic stabilizers, like a value-added tax, should play a larger role in economic stabilization policy research and practice.

Pandemic-era inflation 
Fellows continue to examine the origins of the pandemic-era inflation surge. Olivier Blanchard’s 2023 paper coauthored with Ben Bernanke entitled “What Caused the US Pandemic-Era Inflation?” was cited in the 2025 Economic Report of the President and published in the American Economic Journal: Macroeconomics. Joseph E. Gagnon found countries with higher inflation in the 2000-2015 period had higher COVID-era inflation, and the effect of long-lagged inflation is both economically and statistically significant—his findings were cited by the Financial Times. Karen Dynan and David Wilcox organized, compiled, and edited the “Understanding COVID-Era Inflation” series. The project, which was published fully in 2026, had 13 substantive papers, including an overview paper on the lessons drawn from the series. 

Central bank comparisons 
In a blog and corresponding Working Paper, Patrick Honohan argued that comparing central banks' experiences is difficult because of their different accounting practices. 

US-China trade war 
Adam S. Posen argued in Foreign Affairs that tariff escalations would undermine trust and faith in the competence of the US. The essay was cited by the Financial Times multiple times and translated and published in China Daily. Tianlei Huang was cited by the Financial Times about China’s response to the tariffs. Yeling Tan pointed out in Project Syndicate that other countries would cultivate networks of diverse partnerships, rather than trading only with the US or China. Mary E. Lovely was featured on CNN, Bloomberg TV, and Bloomberg.  

China’s economic growth 
Martin Chorzempa, Tianlei Huang, Mary E. Lovely, and Yeling Tan spoke at a PIIE event on China’s economic outlook, and Huang participated in a CSIS event that received over 100,000 views and was cited in the Financial Times. Patrick Honohan found that although China’s GDP, at market prices and exchange rates, is still much lower than that of the US, the opposite is true if the calculation is made at the international purchasing power parity (PPP) prices. Adam S. Posen spoke at the University of California San Diego Economics Roundtable Lecture Series, answering what China’s slower economic growth would mean for the global economy. Nicholas R. Lardy was cited in South China Morning Post, and Lovely was featured on NPR.

Private sector trends 
Tianlei Huang and Nicolas Véron’s tracker on the share of China’s state vs. private sector among the country’s largest listed companies found the private sector rebounded throughout 2025, fueled by China’s “new economy” in high-tech manufacturing, decarbonization, and innovation. It was cited by the Washington Post. Huang’s 2021 blog post on ageism in China’s private sector was cited in a March 2025 article in The Economist.  

US-China cooperation on fentanyl 
The Trump administration has attempted to stem fentanyl flows in the US, including with some tariffs on China. Marcus Noland and coauthors found that cooperation between the first Trump administration and Beijing beginning in May 2019 reduced fentanyl overdose deaths in the US by roughly one-quarter over a three- to five-month period. His work was cited by The Economist and listed in Bloomberg’s newsletter as “need to know research.” 

Export and technology controls 
Martin Chorzempa argued a new export rule from the Commerce Department’s Bureau of Industry and Security went too far, hurting US interests. In an op-ed for Foreign Policy, Chorzempa asserted that the more the US tries to freeze China with export controls, the more it risks forcing Chinese AI firms to develop their own AI ecosystem. He continued writing about export controls in an op-ed for the University of Pennsylvania and was cited by the New York Times on China’s rare earth restrictions and China’s AI advances.  

AI and energy 
Following a historic boom in investment in AI, Martin Chorzempa briefed members of Congress on DeepSeek and joined PIIE Insider LIVE with Anjali V. Bhatt to explain the US-China AI race. On an episode of PIIE’s Policy for the Planet podcast, Monica de Bolle explored how China’s electrical grid is better prepared for AI expansion than the US. 

Renminbi vs. the dollar 
Martin Chorzempa examined Chinese approaches to increasing the renminbi’s role as an international settlement currency and found that Beijing’s efforts fall short of posing a systemic challenge to the dollar or to infrastructures like SWIFT. 

Data integrity in China 
While most discussion regarding Chinese data questions their reliability and some analysts believe there is widespread outright falsification, Nicholas R. Lardy and Tianlei Huang found some of the most important economic data, including household consumption, fixed asset investment, and trade data, have improved in quality. 

Private consumption 
Many experts see China’s economy as constrained because of a weak social safety net, resulting in anemic domestic consumption spending. But Nicholas R. Lardy argued recent data indicate that China has expanded many parts of its social safety net and that consumption spending has accelerated. 

Chinese overcapacity 
Mary E. Lovely explored the different approaches the US and EU have taken in response to concerns about China’s exports and prospects for coordinated action against Chinese overcapacity. 

Eurobonds 
Given geopolitical turmoil, global investors want an alternative to US Treasuries. Olivier Blanchard and Ángel Ubide proposed a pathway for Europe to deliver such an alternative and benefit from it: a deep and liquid Eurobond market. Their blog, one of PIIE’s most popular pieces published in 2025, was cited by European Central Bank (ECB) president Christine Lagarde, ECB executive board member Philip Lane, and Carlos Cuerpo, Spain’s economy, trade and business minister.  

NATO defense spending 
Cullen S. Hendrix warned that President Trump's call for the North Atlantic Treaty Organization (NATO) to boost military spending to 5 percent of GDP could catalyze an arms race with those near-peer competitors or create incentives for adversaries to strike before potential expenditures go into action. His blog was the seventh most read PIIE publication in 2025 and led to coverage by the European Commission, Deutsche Welle, Fox News, Japan Times, and Reason Magazine.  

Argentina in crisis 
PIIE fellows were outspoken about US intervention in Argentina’s monetary crisis announced in September. In one of PIIE’s most read pieces, Monica de Bolle wrote if the US supported full dollarization for Argentina, the move would have economic, political, and institutional repercussions. She questioned if the US government knew it would be difficult to disentangle the US and US investors from Argentina. Maurice Obstfeld cautioned even concrete US interventions are unlikely to save Argentina's peso for long unless they go further than so far promised.  

After the IMF approved a new loan program for Argentina in April—its 23rd since 1958—Alejandro Werner described what Argentina needed to do to maintain the agreement and added in the Financial Times that international support should be contingent on policy and political reforms. Monica de Bolle warned in an op-ed for the Chatham House that Javier Milei’s so-called chainsaw economics wouldn’t stabilize the economy.   

Milei’s challenges 
Alejandro Werner explained how Argentine president Javier Milei's administration faced two pivotal challenges in 2025—performing strongly in the 2025 midterm elections and reducing the overvaluation of the Argentine peso. Werner was featured on the Financial Times’ The Economics Show podcast to talk about what Milei got right and wrong in his first year

EU’s changing role in the world 
Fellows advised what it would take for Europe to step up and lead global affairs as the US retreats from the international sphere. Adam S. Posen gave the keynote speech at the European Systemic Risk Board’s (ESRB) ninth annual conference, arguing that Europe is well positioned to manage the financial stability risks arising from the Trump administration, but Europe can and should rapidly increase its own self-insurance by supporting a global rise in euro usage. Olivier Blanchard and Jean Pisani-Ferry recommended the EU should take the lead in convening alliances of countries to counteract threats to the global order and learn how to act effectively without the US (Project Syndicate). Elina Ribakova suggested in Foreign Affairs that if Europe wants to lead, it needs to ramp up public investment, coordinate on defense, and pass economic reforms to ensure competitiveness. Jacob Funk Kirkegaard analyzed the trajectory of Europe's accelerating rearmament, focusing on the fiscal implications for national governments and EU institutions. 

Climate policy 
Fellows continued analyzing the effects of climate change and recommending policy for mitigation. Kimberly Clausing continued research on climate coalitions, US and EU climate policy, and carbon border adjustments, including proposals for a heavy industry climate coalition and organizing the Carbon Pricing and Green Transition Convening in Pretoria, South Africa. Monica de Bolle contributed an essay to the New York Times World Review on green hydrogen in Brazil. Warwick J. McKibbin studied the global economic impacts of antimicrobial resistance, finding significant costs associated with worsening resistance of microbes to antimicrobial medicines due to demographic and climate changes.  

Europe and the US 
Among the many ways PIIE scholars are engaged across Europe about US relations, Cecilia Malmström argued the trade deal negotiated between the US and the EU is not a good agreement for Europe and was cited by Sydsvenskan and Le Grand Continent. Patrick Honohan explained in the Irish Times why Ireland is more exposed to Trump’s tariff war than the rest of Europe and in the Forum on Financial Supervision the impact of US policies on central banking in Europe. 

New EU trade relations  
Cecilia Malmström wrote about new trade alliances the EU made with Latin America and recommended alongside Yeo Han-koo, former PIIE fellow and current trade minister for South Korea, that the EU and South Korea should join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Malmström was cited by the Financial Times on renewed EU interest in joining CPTPP and on Singapore and the UAE planning to form a new trade group of small and medium-sized nations. 

Europe’s monetary policy 
Nicolas Véron argued that supervisory integration is the only realistic option to create a foundation for the successful development of competitive capital markets on a European scale. He contributed a report to the European Parliament on banking sector policy and a paper debating that Poland has more to gain from progress towards the EU Savings and Investment Union. Véron’s book, Europe’s Banking Union at Ten: Unfinished Yet Transformative, published in 2024, was reviewed by Barry Eichengreen in Foreign Affairs. Olivier Blanchard testified on fiscal policy to the Cours des Compte in France. 

France’s new government 
Following the formation of France’s new government, Jacob Funk Kirkegaard explored options for the EU if France approaches a financial crisis and if France would risk losing full control of its nuclear weapons. Nicolas Véron testified in February in a hearing with French Members of Parliaments Charles Rodwell and Sylvie Josserand.  

United Kingdom 
Nicolas Véron testified in July to the UK Parliament on the growth of private markets in the UK following reforms introduced after 2008. 

Ukraine and the EU 
In the launch of What Now, Europe?, a new virtual series and podcast hosted by Nicolas Véron, Véron hosted Oleksandra Azarkhina to discuss both the challenges and trade-offs if Ukraine were to join the EU.  

Ukraine’s and Russia’s wartime economies 
Elina Ribakova explained in the Financial Times how European financing combined with Ukrainian ingenuity is building an effective deterrent against external threats. This combination also shows that in the modern economics of war, size matters—but far less than conventional wisdom suggests. She organized a PIIE event on the subject, was featured on Financial Times’ podcast The Economics Show with Soumaya Keynes, and was interviewed by Bloomberg. 

Ukraine’s critical minerals 
The potential minerals deal shelved in February by President Trump and Ukrainian president Volodymyr Zelensky hinged on a bullish view of Ukraine's critical mineral wealth, but significant questions remain about Ukraine's mineral endowments and the economic viability of extracting them, Cullen S. Hendrix wrote in Barron’s. 

Russian assets and investment 
Nicolas Véron discussed considerations of how the EU could use frozen Russian assets to fund Ukraine’s economic reconstruction while respecting international rule of law on CNN International’s Quest. In an op-ed for the Financial Times, Elina Ribakova warned US businesses that investing in Russia remains a risky play even if relations between the two countries normalize.  

Ukraine reparations loan 
Jacob Funk Kirkegaard asserted in an op-ed for Euractiv that there aren’t any good arguments against a proposed EU “reparations loan” to Ukraine. In an op-ed for Bruegel, Nicolas Véron argued the Ukraine reparations loan was a “clever workaround that would leave Russia’s assets untouched but leverage them to support Ukraine.” 

Middle East 
Cullen S. Hendrix detailed three fundamental shifts in energy markets that have radically altered the risk premium associated with the crude oil market. Hendrix’s blog led to an appearance on the Lines On Maps Extra podcast, which garnered over 61,000 views on YouTube. Adnan Mazarei wrote a blog about why a debt restructuring in Syria would be difficult and an op-ed in Project Syndicate about Egypt’s economic crisis. Following US airstrikes in Iran in June, Alan Wm. Wolff wrote a blog discussing how the global trading system can help manage the threat of Iran’s nuclear capabilities.  

Cross-border payments in Asia 
Martin Chorzempa analyzed in a chapter for an Asian Development Bank report the current state of financial inclusion for payments in Asia, critical infrastructure needed to build out better payment systems, and cross-border payments. 

North Korea 
In a paper for Asia and the Global Economy, Marcus Noland said that if North Korea experiences another food crisis, foreign partners are likely to encounter a state-dominated model resembling the system that existed in the early 1990s at the onset of the famine and the attendant problems that humanitarian-relief agencies confronted at that time. 

Japan 
With renewed doubt about the scale and scope of the dollar's "exorbitant privilege," Takeshi Tashiro and Kenneth Rogoff analyzed Japan's ability to issue safe government debt at scale. Jacob Funk Kirkegaard pointed out that aging Asian and European economies could learn from Japan, which has mitigated some of the worst economic effects of aging by raising domestic labor utilization and immigration levels. Mary E. Lovely discussed on CNN the US-Japan deal and what it means for the US auto sector.  

Australia 
In an opinion piece for the Financial Review, Warwick J. McKibbin argued that the Reserve Bank of Australia’s balance sheet could take until the 2040s to recover from the COVID-19 pandemic. 

China and developing countries 
Arvind Subramanian wrote op-eds in Project Syndicate about how the new “China Shock” is hitting poor countries the hardest, how surging US protectionism and resurgent Chinese mercantilism are affecting the rest of the world, and how the traditional export-led growth model is still a viable path forward for low-income countries.  

Alejandro Werner joined the Financial Times’ The Economics Show podcast to talk about what Milei got right and wrong in his first year.