Limited deals, limited effects

Posted by: Paul Donovan

14 Oct 2019
  • The US and China agreed to what might be described as a partial trade deal. The October tax hikes that threatened US consumers and companies will not now take place. Avoiding a tax is good, in particular for equity listed companies (a tax on trade is a tax on equities).
  • The September trade taxes are still in place. The December trade taxes are still scheduled. The economic upside from any further progress is perhaps limited. First, the longer trade taxes are in place the easier they are to evade. This reduces their impact, but also the impact of removing them. Second, trust in the global trade order has been badly damaged.
  • Just when economists thought they were out, politicians pull us back in. The interminably tedious EU-UK divorce, which briefly looked like it might end, seems back to being interminable. The EU does not seem to understand how the UK's Irish border plans might work. There is less certainty that the UK Parliament would agree to the proposed deal.
  • Chinese imports and exports weakened, as expected, ahead of the October holidays. Euro area industrial production is due, and there is a smattering of central bank speakers on the agenda.