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Taxing millennials?

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The EU's bailout of Germany seems to be holding, if in a shaky fashion. German Chancellor Merkel and the junior coalition partner, the CSU, agreed to a deal on immigration. There is the minor matter of getting the middle coalition partner, the SPD, to agree.
  • The euro rallied a little on the news, but this is not enough to cause major changes in the markets. We hear from the ECB's Praet today, but this is also not enough to cause major changes in the markets. The ECB has told everyone what it intends to do for the next year.
  • Global taxes on consumers of traded goods so far, plus US taxes on USD 50bn of goods partially made in China, plus retaliation total just under 0.4% of the world economy. Taxes are rarely applied evenly. Reports suggest that products bought by younger Americans are targeted in the latest tax hikes.
  • The Chinese yuan weakened to levels not seen for a year. A US import tax reduces profits for Chinese exporters. Currency depreciation increases profits for exporters. (Profits change more than prices do). However, Chinese imports of raw materials will rise in price, so currency depreciation is not a direct offset for a US tax increase.