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Taxing times

| Posted by: Paul Donovan | Tags: Paul Donovan

  • US President Trump's pledge to impose significant tax increases on steel and aluminum did not give details, and the details will matter. The initial reaction of the equity market rather neatly summarises the economics of this – the rally in steel and aluminum producers being overwhelmed by declines in the equities of everyone that uses steel and aluminum.
  • One risk for markets is that, after two rounds of tax increases this year, this protectionist tendency becomes a trend. The conflict is also rather old fashioned. US President Trump is sending in the cavalry to charge at a battery of nuclear missiles. Patterns of trade are changing as robotics and digitization shift the location of production.
  • UK Prime Minister May gives a speech on the British plan to cut the EU off from the UK's single market, and other aspects of the long goodbye from the EU. While this topic is indescribably tedious, this response to the EU's draft divorce deal is probably important.
  • Eurozone producer price inflation is due, with the core measure being a decent indicator of pricing power by the region's companies. German retail sales are due, and the Canadian who runs the Bank of England is speaking.