Impact of New Steel and Aluminium Tariffs Imposed in the US

On February 2, 2018 the US administration announced a new set of tariffs to be applied on imports of steel and aluminium. The tariffs of 25% and 10% respectively will disproportionately affect US’ closest ally and trading partner – Canada. The other countries have relatively manageable exposure to the US imports (see the table below).
Although the event can be applied in Mira either by volume or price impact, we have elected to use the price impact as the key input. Price impact values are derived by weighting the value of exports of steel and aluminium into the US and applying respective tariffs. Only steel has been taken into account in the analysis of countries with small exports of aluminium (Brazil, South Korea, Mexico, Turkey and Japan).

Country % of Imports
% of Imports
Price Impact US as %
of Exports
Volume Impact
Canada 16% 52% 17% 78% 27.1%
Brazil 13% 0 25% 8% 2.8%
South Korea 10% 0 25% 14% 4.9%
Mexico 9% 0 25% 27% 9.3%
Russia 9% 16% 19% 16% 5.6%
Turkey 7% 0 25% 10% 3.5%
Japan 5% 0 25% 7% 2.6%

A more detailed breakdown of the trade patterns can be found on the MIT OEC website.

Register for Webex: Running The Tariff Stress Scenario in Mira ABM

3 pm Monday, 5 March, 2018

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Risk Scenarios 2018

What Could Possibly Go Wrong?

It is not easy to build plausible yet severe economic scenarios. Doubly so, if those scenarios are assessed in LINKS Mira Agent Based Model (ABM). Unlike conventional models, Mira ABM takes into account unintended consequences of events – both positive and negative. Just like in real life, positive and negative effects cancel each other out, with little impact on investments. So suggest your scenario for 2018 by describing it on our LinkedIn feed, or better still, by downloading Mira ABM and introducing the scenario in our system. The best (or the worst?) scenario will earn you a New Year’s gift and a professional reputation among our institutional clients.

Some effective scenario pointers:

  • Any social, geopolitical or economic hypothetical but plausible event can become a basis for a scenario
  • In order to build a scenario, we will need “the point of first impact”, i.e. an industry in a country that experiences direct economic hardship in terms of changes prices or volumes due to the scenario. For example, an incomplete scenario is “a war in North Korea”. A more complete scenario is: “a war in North Korea cuts production volumes of mobile phones, semiconductors and flat screens in South Korea”.
  • Impactful scenarios tend to be large, across multiple industries and countries with greater trade ties with the rest of the world.
  • You can read more about building scenarios with Mira ABM here.

How to Suggest a Scenario:

You can describe the scenario on our LinkedIn feed., or send as an email:

Run Economic and Geo-political Scenarios

Explore how Agent-Based Models (ABMs) can be used to run stress tests and scenario analyses.

DiVe regional development initiative co-organised by LINKS

RDF of Armenia and its partners – LINKS Analytics, PEM Consult and iPricot, will hold a new format of a start-up event – Distributed Venture (DiVe) Gavar. The DiVe is a regional empowerment initiative aimed at improving the local economy of Gavar, Armenia – a small regional centre.
The DiVe concept is simple: international participants with global industry expertise will contribute their start-up ideas and support for niche (normally B2B) apps, and the DiVe team will put together a team of software engineers and project management based in Gavar to develop the app.
The DiVe platform is not for every entrepreneur. In fact, most entrepreneurs would find that they lack control and say in the implementation process. The Distributed Venture is designed for individuals who find it comfortable to work in teams of experts. The added benefit is that your risk is far more limited: DiVe is a way to see your idea implemented without ever quitting your current employer (if you choose to) and having a small stake in the company.
Our first event – DiVe Gavar will take place in Dusseldorf, on October 21, 2016. You can access the event page here.

VBA ALM Conference in Amsterdam

The annual ALM Conference organized by the VBA this year was held in Amsterdam and was dedicated to changes in pension regulation and their impact on Asset-Liability Management. Taron Ganjalyan, the Managing Director of LINKS presented research on potential unintentional impact of multiple regulations titled “How Doing The Right Thing May Be Wrong: Regulation, Reflexivity and Markets”.
The presentation is available from the website of the organizer or can be downloaded directly 

Global Systemic Risks 2013 Review

It appears that asset bubbles have become the most potent instrument in the hands of the governments in their efforts to generate the elusive growth rates, and not just in the developed economies. The overriding theme of this year’s Global Systemic Risks review is the government policies that trigger, and in many cases foster, asset bubbles – self-perpetuating price or turnover increases in parts of the economy that create imbalances elsewhere.
The 2013 review includes two new sources of risk: the extraordinary rise in capital expenditure by global utility companies and the Japanese government debt, along with sources of risk that were covered last year: civil aerospace, the financial system in China and the U.S. farmland. Combined, these asset bubbles add over $ 4 trillion worth of “hot air” to the world economy. But above all, they create unsustainable imbalances in dozens of industries and are likely to cause significant wealth destruction if not timely deflated.
Needless to say, there are plenty of intricate linkages between all the risk sources that in combination serve as scaffolding for the world economy. The same industrial conglomerates supply capital equipment for the utilities, transport and infrastructure projects in China and aircraft engines for the aerospace industry. The same few banks that hold large part of the Japanese government debt or Farm Credit Funding bonds attempt to place parts of the project finance business in the market for the institutional investors. A clear view of these linkages and how they impact the true economic risks of institutional portfolios must be a key component of forward-looking strategic risk management efforts of principal investors.

Introducing Asset Allocation Resilient to Systemic Risks

This white paper briefly examines the current standard asset allocation practice and introduces asset allocation methodology that incorporates Graham and Network Risks. Resilient asset allocation balances ambition to generate returns with the awareness of systemic risks. The results are compared with most common fixed-weight asset mixes as well as asset allocation implied by the risk parity approach.
In the past number of years LINKS have introduced and used network- and value-based risk management frameworks in order to gauge systemic risks inherent in institutional portfolios. Given the multiple layers of legacy asset allocation processes in place, implementation of LINKS risk frameworks has always been an add-on and ad-hoc exercise for institutional investors. However, as the methodology matures, there is more interest in a systematic asset allocation methodology that is based on LINKS risk frameworks.
Download the document

Global Systemic Risks 2012 edition available now

LINKS Global Systemic Risks 2012 edition is now available on the portal. Following a broad and extensive review of multiple supply chains globally, we have now focused our attention on four sources of systemic risks:

  • China’s local government debt and infrastructure spending
  • The US agriculture and farmland boom
  • Unsustainable rates of expansion of aircraft fleet in emerging markets
  • The second US technology bubble

Two sources of risk warrant special treatment: the EMU crisis and energy prices. We have thoroughly researched and mapped four key sources of global risk, or “the future bubbles” for the year 2012, complete with over 500 companies, agencies and governments involved, network effects and potential asset losses if any of those bubbles burst.
Download this complementary report.