The 2nd China Shock: Why Chinese Companies Are Making Zero Profit

In this episode of Econ 102, Noah Smith and Erik Torenberg discuss current events through an economic lens, beginning with the recent mayoral election and its potential impact on New York City's policies, drawing parallels to San Francisco's experiences. They then analyze the implications of actions involving Iran, dismissing them as economically insignificant for the U.S. due to its status as a net oil producer. Shifting to the U.S. economy, they debate the likelihood and impact of a potential recession, the effects of tariffs, and the role of industrial policies like the CHIPS Act and IRA, which aimed to incentivize domestic factory construction, particularly in semiconductors and batteries. The conversation transitions to a comparison of U.S. and Chinese industrial policies, highlighting China's shift from export-oriented growth to internal technological advancement, its challenges with unprofitable state-subsidized companies, and its diplomatic missteps.