Posted by: Paul Donovan

06 May 2019
  • US President Trump had said there would be an "epic" trade deal with China. Now, the Trump Twitter Feed is signalling higher taxes on US consumers of goods partially made in China. There is a threat to increase the 10% tax to 25% on Friday. There is a threat to tax US consumers of everything partially made in China "shortly" (that would take time to implement).
  • Trade taxes have had a direct impact via increased costs to US companies. Trade taxes are a tax on equities, because nearly all trade is quoted by listed companies. But uncertainty about trade taxes has delayed investment, hurting global trade and manufacturing. Equity markets have rallied this year on hopes global growth would stabilize with a trade deal.
  • Investors could regard the Trump Twitter Feed as "art of the deal" negotiation tactics. However, if the Chinese do not attend negotiations in the US this week, then the tactic may not work so well.
  • The PBoC in China has implemented a targeted cut in the reserve requirement ratio, easing policy. The move itself is not a surprise. The timing may be strategic. Europe offers a set of business sentiment opinion polls, and retail sales data.

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