Trade – a distraction from impeachment

Posted by: Paul Donovan

04 Dec 2019
  • US President Trump moved a step closer to impeachment yesterday, with the conclusion of the initial House investigations. This is not a direct focus for markets. Trump's relations with Congress are unlikely to get any worse as a result, and it is too soon to speculate on how this will impact the 2020 election.
  • Yesterday had several trade tweets from US President Trump (it was a bad day for US consumers of champagne and French porcelain napkin rings). Investors disliked the risk that a China trade deal may be delayed beyond the US election; it implies more trade taxes. A tax on trade is a tax on equities. The House passed a bill on Xinjiang that may raise risks around trade negotiations.
  • Is there additional economic risk from trade uncertainty? More taxes would be a drag on growth. But the main damage of US President Trump's trade policy is uncertainty and weaker investment. That damage has already been done. Markets remain vulnerable, but further economic downside (or upside) risk from trade policy changes may be more muted.
  • There are some service sector sentiment polls due in various places. Several ECB and US Federal Reserve speakers are jostling for the limelight.

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