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The Trump tax

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Defenders of free market capitalism clung to the idea that US President Trump would not conduct a trade war because "as a businessman" he would know better. Leaving aside whether a property developer has peculiar insight into free trade's benefits, the hope is challenged by the threat of a 20% Trump tax on Mexican trade.
  • Extrapolating from these actions is also concerning. If a trade war with Mexico, why not with China? The US consumer could counter this policy. If US retailers quoted the price of goods and the mooted Trump tax separately, consumers may understand how their living standards are hurt by protectionism.
  • UK PM May meets Trump in Washington today. German Chancellor Merkel meets French President Hollande in Berlin today. Both meetings may spark some investor interest. In the more predictable world of economic data, Japanese deflation continued (this is Japan, after all) but was less deflationary than last month (because of oil prices).
  • US GDP for 4Q16 is due (perhaps the last quarter of the US as a free market capitalist economy). Growth is expected to be around trend, with some inflation pressures starting to be evident.