French toast

Posted by: Paul Donovan

03 Dec 2019
  • US President Trump tweeted plans to tax US consumers of French champagne and cheese (and other goods). The sentiment seems to be "let them drink Coke." Taxing trade is one of the few things the US president can do alone. Trump is branding the Democrats as "do nothing" – we may get more such tweets as a demonstration Trump is "doing something."
  • Substituting Kraft Cheese Slices for Camembert may be a heavy burden. However, earlier tweets re-imposing taxes on US users of Brazilian and Argentinian steel seem even more serious. Companies have spent years believing that they can operate global supply chains. Trust in global supply chains is threatened when a Trump trade deal does not seem to last more than a few months.
  • If trust in global supply chains is weakened, investment in global supply chains will be weakened, and any economic recovery in 2020 will be weakened. Trust is hard to restore once it has been damaged. You cannot turn burnt toast back in to bread. A lot of toast was burnt yesterday.
  • The data calendar is relatively quiet. Eurozone producer price inflation is unlikely to excite much market attention. UK BRC retail sales were weak in November.