Daily update
Daily update
- Investors are inclined to view US President Trump’s early retreat from trade taxes on imports from China as significant, not just for themselves but as a signal of a willingness to capitulate to other countries. Markets are not inclined to take Trump’s threats of future possible tax increases seriously.
- While US tariff retreats have come earlier than expected, there are three lingering issues. Taxes are still high—one of the largest US consumer tax increases in modern times. Uncertainty about trade and other policies has hampered investment. The ‘de minimis’ tax exemption has not been reinstated for China, meaning consumers will face higher prices (which will probably not be captured in official inflation figures). These factors mean the US will have a slowdown this year, not a soft landing.
- US April consumer price inflation will not reflect trade taxes (that will be June or July data), other than possibly some profit-led inflation. The US National Federation of Independent Business (NFIB) small business confidence survey is of limited economic value, but as a Republican-leaning survey, may indicate whether uncertainty has penetrated the US partisan media bubble.
- Germany’s ZEW sentiment poll may err towards the pessimistic (most economic forecasters understand the benefits of free trade, and perhaps react with more outrage when that is challenged).