Will Trump tax equities further?

Posted by: Paul Donovan

08 Feb 2019
  • A quick reminder. Nearly all of the world's trade is conducted by large companies. If trade is taxed, one of three things happens: large companies pay the tax; customers of large companies pay the tax; large companies spend money avoiding the tax. In other words, a tax on trade is a tax on equities.
  • Political noise around the US-China trade dispute (and the possibility that US President Trump will increase trade taxes) has therefore added equity volatility. The world economy continues to perform OK, and markets are still priced for a trade deal – but risks must be reflected.
  • Germany, with rather bad timing, will be releasing its trade data today. Meanwhile, the German finance minister has been cheerleading the German economy in the wake of softer industrial production numbers. France and Italy offer their industrial production data today.
  • UK Prime Minister May visits Ireland today (Ireland being the country most at risk from a no-deal EU-UK divorce). It appears that the British government has in fact been preparing for a no-deal exit for a while (tax cuts and tariff cuts on the agenda). Meanwhile, the British opposition party leader, Corbyn, has taken a stance on the issue, highlighting divisions in the opposition party.

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