Does Trump's major announcement mean major tax increases?
- US President Trump is planning a major announcement today. The expectation is that the announcement will be major, major tax increases. Indications are a 25% tax on steel imports and a 10% tax on aluminum imports (although indications from the Trump White House have been known to change).
- The pass-through of these tax increases to US retail consumers is likely to be less direct than with the earlier washing machine and solar panel taxes. The trend towards protectionism is more worrying for markets. Trade protection remains a key risk to our generally optimistic economic and market view this year.
- US personal income and spending data is due. The figures are unlikely to show anticipation of personal income tax changes. The PCE deflator, the Fed's favored inflation measure, will also be released. This should stay stable. Markets tend to pay more attention to the consumer price inflation measure than to the PCE deflator, in spite of the Fed's preference.
- The UK's incredibly tedious long goodbye from the EU saw a flicker of excitement yesterday. The UK government has said it will not accept the draft divorce agreement. Sterling fell. There is the exciting prospect of a major speech by UK PM May tomorrow.