Matthew Klein, founder of The Overshoot and UN/BALANCED and co-author of Trade Wars Are Class Wars with Michael Pettis joins Monetary Matters to discuss what factors really lead to major trade and capital flow imbalances between countries. He argues that factors like income inequality, domestic economic policy and decisions being made at the corporate level can have far more impact than country level trade policy. He also discusses why even though extreme trade and capital flow imbalances may be dangerous, implementing improper solutions can exacerbate the damage.

Follow Matthew Klein on Twitter: https://x.com/M_C_Klein

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Read Matthews Substack The Overshoot here: https://theovershoot.co/

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Timestamps:

00:00 Intro

00:52 Why Trade Wars Are Class Wars

12:13 Trade Surpluses vs Trade Deficits

18:51 Income Distribution Drives Capital Flows

28:28 China's Shifting Income Distribution

33:41 The Problem With China's Growing Trade and Current Account Surplus

41:51 Who is Winning in China?

44:04 How to Combat China's "Cheating on Trade"

49:25 Who Has the Upper Hand in Trade Negotiations?

54:05 Will Tariffs Drive Reshoring?

59:53 How Can the US Restore Balance of Trade?

01:08:29 Conclusions