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Producing with trade taxes

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The US government is still shutdown. US industrial production data will sneak out. Business sentiment data has been more negative of late, but this may not reflect reality. Investors have a touching belief that survey respondents answer the questions they are asked in an honest way. Neither of those things is necessarily true. Politics rather than economic reality may be influencing sentiment.
  • There are some headwinds to economic reality. Trade taxes mean that US companies dependent on Chinese components have an incentive to move industrial production from the US to (say) Canada, cover their products in maple leaf stickers and avoid taxation. This is not likely to meaningfully affect production data yet, however.
  • The Eurozone area offers current account data. Markets will not pay too much attention. Even with heightened trade tensions, the focus is on national trade positions – perhaps because politicians find it easier to attack stereotype national characteristics. How does one stereotype the Euro?
  • UK December retail sales are due. There is also UK politics. No one wants to hear about UK politics. The UK consumer probably spent December shopping online, and then tuned in to the "Strictly Come Dancing" final, to avoid hearing about UK politics.