Demonstrating trade tax failings

Posted by: Paul Donovan

04 May 2021

Daily update

  • The US trade deficit for March is likely to grow. US President Biden has not reversed US President Trump’s taxes on US consumers of imported goods, but a policy of trade taxes rarely works to change a trade imbalance. China has lost US market share for goods subject to trade taxes, but it is other countries rather than the US that have picked up that market share. When consumption shifts from goods to services, the trade deficit may lessen.
  • South Korean consumer price inflation for April reflected the situation in the oil market a year ago. This is not something to worry about.
  • UK lending data is unlikely to show strong demand for consumer credit. As with many other countries, UK consumers have acquired savings that they can draw upon to finance spending, lessening the need to borrow. Mortgage data may be of some interest as people realize that city living is a lifestyle choice more than an economic necessity.
  • US Fed Chair Powell, who is not an economist, noted that the US economy was strengthening but not everyone was benefitting equally. Manufacturing and professional services have fewer restrictions and have been able to bounce back earlier—but personal services (which employ lower income workers) are later to recover.

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