What would a tax delay signal?

Posted by: Paul Donovan

16 May 2019
  • There is a suggestion that US President Trump may delay adding yet more taxes to the US consumer via European and Japanese auto tariffs. This suggestion does not have the authority of a tweet, only a draft executive order. The positive spin is that a delay signals an understanding of the economic damage from trade taxes. The negative spin is that this allows a more forceful approach to taxing US citizens who buy things partially made in China.
  • The interminably tedious EU-UK divorce continues with high political drama, or farce. Today, members of the UK governing party will attempt to force UK Prime Minister May to resign. The opposition Labour Party is refusing to confirm that members might abstain in the next parliamentary vote on leaving the EU – if enough abstain, the vote might pass.
  • European trade data comes out, too late to be of much interest (European data is always too little and too late). Other European data had been showing stabilization of growth in the first quarter.
  • There are several Fed speakers on the agenda. Markets are pricing in rather extreme scenarios for US interest rates – easing is unnecessary under any but the most negative of trade tax scenarios.

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