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Trump's USD 12.5bn tax hike

| Posted by: Paul Donovan | Tags: Paul Donovan

US President Trump detailed a future USD 12.5bn tax increase for the US consumer. The amount levelled against goods partially made in China is not surprising. The goods to be taxed are a little surprising. Most of the taxes are on capital goods, where the tax is likely to be passed on to American buyers.

China has indicated that it would be rude not to respond. However, this is not a trade war. Sensationalist journalists using the words "trade war" does not make it a trade war. Significant disruption to trade would make it a trade war, and we do not have that. The US trade deficit is not likely to improve, of course.

In the Eurozone, we have unemployment and consumer price data for March (undermined by the release of national data already). The stronger labor market is slowly building cost pressures – and while good companies have workers who work harder, offsetting the cost increase, this should gradually add to inflation.

Italy's President Mattarella is about to start government negotiations. Investors are not too concerned. Italians are used to some political uncertainty. Mattarella is not adding to the uncertainty by sending random tweets.