Technology and trade tensions

Posted by: Paul Donovan

19 Jun 2020

Daily update

  • European leaders are unhappy that the US has withdrawn from multinational negotiations over a technology tax. The US has threatened trade taxes against Europe and the UK over this issue. Politically, tech taxes seem attractive. Governments need fiscal support, and there is a popular perception of unfairness around how tech companies pay tax.
  • In the interminably tedious EU-UK divorce, there is a new suggestion (it would be foolish to call this "progress"). The idea is the UK takes EU rules, and trade taxes are applied if it walks away from those rules. Regulatory barriers to trade are more costly than trade taxes, so it might not be a balanced proposal.
  • The forecast range for UK retail sales (ex-auto fuel) was 0% m/m to 12% m/m. The data managed to come inside that range – at the upper end. Consumers are leaving lockdown with savings to spend. European and US consumption is likely to perform better than production at first, as inventories are used to meet demand.
  • German producer price inflation is unlikely to excite too much attention. First quarter US current account data is too out of date to be of much interest unless it becomes a political focus (the deficit will continue to be large).

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