Taxes, taxes, everywhere

Posted by: Paul Donovan

14 May 2019
  • It turns out that equity markets do not, in fact, like being taxed. The recent equity declines could be interpreted as investors suggesting that the costs of trade disagreements outweigh the benefits of any future trade deal. China has imposed new taxes on goods partially made in the US. The US has started proceedings to impose new taxes on pretty much anything partially made in China.
  • US import and export price data is due today. If China were forced to accept the burden of the US trade taxes, then core import prices should be falling. If trade taxes are being evaded by shifting supply chains, or if US companies and consumers are bearing the burden, then the direction of travel for import prices would be positive.
  • Eurozone industrial production may show some of the second round effects of the trade dispute – delayed investment reduces production of investment goods which is something Europe focuses on.
  • The UK labor market has continued to offer strength - tax return data certainly hints that the UK may be doing better than officially reported. Keep an eye on earnings data, with the Bank of England inclined to raise rates (if it weren't for those pesky politicians).