Trump threatens more taxes

Posted by: Paul Donovan

13 Nov 2019
  • The media focus on US President Trump's speech to economists was on the threat to "substantially" increase taxes on US consumers of goods partially made in China. This was softened by the promise that a deal was "close", and by supply chain shifts that help to evade the taxes.
  • US President Trump suggested there was no uncertainty. That would seem to be challenged by quite a lot of evidence. UBS's survey of industry leaders shows trade policy is causing uncertainty, which is reducing and changing investment. That is unlikely to be repaired by a trade deal. Trust in the global trading order has been damaged.
  • Inflation data dominates the data calendar. Average consumer price inflation hides some price rises. US headline CPI is below 2% - most prices are rising by closer to 3% (the median rate). A few big price drops bring down the headline. UK inflation will be smothered by the eternally tedious UK-EU divorce.
  • Eurozone industrial production is due. This is not especially interesting by itself, but is likely to emphasise the gap between reality and sentiment data. Sentiment does now appear to be coming back to reality, but that tells us about sentiment overreaction, not about reality.

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