How much will the Trump tax hikes hurt?
- How badly would US President Trump's trade tax increases hurt the US economy? There are two hints today. Producer price inflation is due, which signals corporate pricing power. Companies with pricing power are likely to pass on any taxes imposed on goods partially made abroad.
- The Federal Reserve's Beige Book is a survey, but a better quality survey. An ISM or PMI survey may be tossed to summer interns to fill in as best they can. But a conversation with the Federal Reserve is likely to be treated more seriously. Anecdotal evidence is that companies are worried about trade taxes, but have not started cutting jobs or investment.
- Support for the idea of an orderly EU-UK divorce came yesterday. Attempts by rebel politicians to present an alternative plan for trade convinced markets that there is no coherent alternative. Reports are circulating of a special divorce summit in November to do the deed.
- There are consumer price inflation numbers from Spain and Portugal. As ECB President Draghi seems to ignore such data, it is likely that markets will ignore the data. Canada and the US say there is progress with not-NAFTA trade talks without showing any progress with not-NAFTA trade talks.