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War is reshaping global markets. I have a paper under review that asks: who wins or loses when supply chains meet geopolitics, and what are the political implications? Since the world is changing faster than our overburdened peer-review system can handle, here's the 📃 + a🧵 osf.io/preprints/so...

As states weaponize supply chains, warnings of deglobalization and aggregate welfare losses have proliferated. But neither has materialized: trade volumes remain high and supply chains continue to span the globe. This paper argues that the surprising resilience of aggregate trade obscures a large-scale redistribution creating K-shaped divergence among firms navigating geoeconomic reordering. Who wins and who loses depends on two dimensions of corporate power: the strategic indispensability of what firms produce and their organizational capacity to reconfigure operations around geopolitical constraints. Because strategic designation attaches to specific outputs rather than broad industry categories, these capacities vary sharply among firms nominally facing identical pressures. Drawing on an original dataset of over 21,000 corporate earnings calls annotated using large language models alongside firm-level financial data, I demonstrate that sector membership explains remarkably little outcome variance. Adaptation operates hierarchically within industries, not between them. Firms controlling chokepoints or possessing reconfiguration capacity capture concentrated gains; those lacking strategic position bear recurring adjustment costs. As these costs cluster in regions previously affected by deindustrialization, supply chain restructuring risks intensifying the geographic polarization that fueled political demand for economic statecraft in the first place.

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The paper has much more detail on the shock that preceded this, including lots of tables and appendices that provide a more detailed breakdown than I can offer here. Please reach out if you have thoughts or comments! osf.io/preprints/so...

osf.io

OSF

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Globalization Faces Its Next Crisis

Where do we go from here? The Strait of Hormuz blockade already constitutes the biggest-ever energy supply shock. Apart from the depravity of another unprovoked war, it sure looks like another systemic supply-side shock that has already happened. www.nytimes.com/2026/03/13/b...

nytimes.com

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The paper also finds that losses disproportionately affect firms in sectors and places that were previously hit by deindustrialization. The very places supposedly rejuvenated by tariffs and trade wars.

While the paper itself does not look at lobbying, the combination of increasingly patrimonial state-business relations and crisis-induced gains accruing at the top is one way to explain why big business has not revolted against the cauldron of chaos that is Washington, DC.

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Politically, the dynamic here is one that breaks sectoral cohesion: when firms do not share a collective interest for or against free trade, coordinated action and coalitional politics make way for deaths of despair and golden plaques delivered to the White House.

I also annotated all geopolitics-related earnings call statements, with GPT-4o as my skillful annotator (as per my system prompt). It shows that executives did not just increase talk about geopolitics, but also changed their tune. They talk with candor about the opportunities, as on display here.

"While these global events are not necessarily positive for humanity, higher defense spending in the West represents a longer-term tailwind for our business"

"These may be the most geopolitically challenging time since World War II, but it's abundantly clear that all of this chaos is leading itself to a growing appetite for the most stable hydrocarbon supplies in the world".

"[customers are] willing to pay premiums for assets like ours that are strategic... and that are located in geopolitically attractive jurisdictions".

Four annotation categories (geopolitical headwinds, tailwinds, choices, and holding strong) displayed as cumulative counts and relative shares.

Crucially, adjustment costs and benefits accrued at the firm-level, not sectors. This tracks with trade literature in political science, showing that corporate preferences are getting ever-more fine-grained, and every firm now fends for itself (e.g. doi.org/10.1017/S000... & doi.org/10.1017/9781...)

Sector-level graph showing a (somewhat misleading) connection between revenue expansion and profit growth.

Firm-level plot showing the enormous dispersion within sectors - some companies extracting pure rents through increased margins, while others bear losses even when revenue increases.

Earnings calls chatter and financial statements both designate the Ukraine war as *the* geopolitical rupture. Much like the current moment, the war propagated as a systemic shock through energy, food, and high-tech supply chains - while delivering windfalls to cargo and tanker shipping.

A frequency plot and heat map showing a large and sustained increase in earnings calls mentions of geopolitics since February 2022.

These two dimensions create four adaptive pathways, in effect constructing a hierarchy of adaptation among those that win because they can adapt, lose because they can't, win because they are irreplaceable, or lose because they can't pass on adjustment costs.

A table showing the four adaptive pathways: Rent extraction, strategic positioning, structural loser, and squeezed middle.

Analyzing over 21,000 earnings calls and firm-level financial data (2020-2025), I show how geoeconomic policies and shocks sorted firms into winners and losers based on (1) vulnerability of inputs to shocks and disruption and (2) the alignment of outputs to state-designated strategic priorities.

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Major disruptions have prompted predictions about the end of globalization. Reality is more complex: Aggregate trade flows and welfare have held strong, with the IMF even raising its growth forecast. But as I show, this conceals a K-shaped, winner-take-all economy. www.imf.org/en/publicati...

The graphs show that in profit terms, the biggest gains and losses around 2022 accrued to a small subset of firms, with a gini-coefficient of around 0.82.

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Luuk Schmitz @luukschmitz.bsky.social · 25/11/2025

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Speaking from experience, this is a great opportunity for feedback and exposure for PhD researchers!

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Luuk Schmitz @luukschmitz.bsky.social · 24/11/2025

Wouldn't the problem with the FT graph be that for tech, capex and cash flow are increasingly the same thing with current vendor financing arrangements? I'd be curious what happens to the top line when accounting for this. (you're doing amazing work compiling all this reporting btw!)

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Luuk Schmitz @luukschmitz.bsky.social · 29/10/2025

Dutch exit poll: This is about three standard deviations away from insane

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Reposted by Luuk Schmitz

Joshua Cova @joshcova.bsky.social · 23/09/2025

🚨 Introducing CommonsCorpus: a comprehensive, annotated and machine-readable database of UK House of Commons' speeches, containing speakers' party-political ID and socio-demographic information. Joint work w/ ➡️ @irenegermani.bsky.social Available here: dataverse.harvard.edu/dataset.xhtm...

dataverse.harvard.edu

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Luuk Schmitz @luukschmitz.bsky.social · 22/09/2025

This comes on top of a longstanding move among big tech firms to vertically (re)integrate by bankrolling custom sillicon. CapEx and vertical integration as the end game of erecting ever-higher walls around the garden? www.fabricatedknowledge.com/p/the-tech-m...

fabricatedknowledge.com

The Tech Monopolies Go Vertical

Some classic (non-aggregation) monopolization!

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Luuk Schmitz @luukschmitz.bsky.social · 22/09/2025

The emerging cross-shareholding and concentration in the U.S. chipmaking/AI stack is a big open question in polecon. Today's announcement comes on top of Nvidia's $5bn investment in Intel. www.ft.com/content/d3ca...

ft.com

Nvidia to invest up to $100bn in OpenAI

Partnership will support huge build-out of data centres for artificial intelligence

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Luuk Schmitz @luukschmitz.bsky.social · 01/08/2025

In H1 2025, AI CapEx added more to US GDP growth than consumer spending (the job market meanwhile is slowing down). At what point should we label this as overaccumulation? sherwood.news/markets/the-...

sherwood.news

The AI spending boom is eating the US economy

AI-linked spending has fueled more growth in the first half of 2025 on average than US consumer spending....

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Luuk Schmitz @luukschmitz.bsky.social · 28/07/2025

I'm not normally one for doomposting, but today's politics feel like the 1890s (robber barons), 1930s (rising fascism, appeasing autocrats), and 1970s (stagflation, new general purpose technologies) are merging into one ugly timelime.

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Luuk Schmitz @luukschmitz.bsky.social · 30/05/2025

Very thrilled and more than a little humbled with this! Thank you to the jury and the editors, and to my co-author☺️

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Luuk Schmitz @luukschmitz.bsky.social · 03/04/2025

Thank you! Glad you found it useful.

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Luuk Schmitz @luukschmitz.bsky.social · 03/04/2025

Wow, thanks for sharing! The fascinating thing for Europe is that its predicament (stuck in diversified quality production, lack of scale in platforms) is now turning out to be its strength: a strong manufacturing base and coercion power over U.S. tech platforms.

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Luuk Schmitz @luukschmitz.bsky.social · 03/04/2025

The really important fine print in today's tariff announcement: if companies can prove that the material origin of their goods is within the value chain definitions of the USMCA, their trade is exempt from tariffs. Make Mexico and Canada great again?

Exceptions to the Trump tariffs announced today.

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But even here the story is complex. In response to Covid and Russia's invasion, supply chains have increasingly regionalized to cushion (geo)political shocks. Companies have developed all sorts of strateiges to circumvent sanctions and export restrictions - no doubt they will try the same now.

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Meanwhile, most firms will suffer from either paying the tariffs or switching to domestic suppliers. But these are not the companies in Trump's orbit. Even if they manage to coordinate, it's questionable whether they'd be heard.

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For why business hasn't (yet) pushed back, I think it's important to note that the pains and gains aren't equally dispersed. Big tech's 'asset-light' model feeds on cross-sectoral control more than high profits. Their extraction of information-rents makes them less vulnerable to tariffs.

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