Trade, and trade taxes

Posted by: Paul Donovan

13 Jun 2019
  • First, an apology to my China listeners about yesterday's podcast about inflation in China. I apologize unreservedly for any misunderstanding caused by my innocently intended comments. We have removed the audio comment from circulation. To be clear, this comment was about inflation and Chinese consumer prices rising, which was driven by 14.4% year-on-year higher prices for pork.
  • US President Trump was critical of German purchases of Russian gas, threatening unspecified sanctions. This is not directly a trade issue (other than the US wishing to sell liquefied gas to Germany). However, the signal of poor US-German relations may cause concern with trade issues still unresolved.
  • US import and export price inflation offers some further insight into the impact of trade taxes. The evidence is that the tax cost is being carried by US customers (unless supply chains are diverted). The prices quotes are pre-tax, and are not showing any unusual declines.
  • Europe has industrial production data for April. This is old information, and preceded by the regions. The weakness in production globally has been narrowly focused – capital goods sectors, and autos. The early shutdown of the UK auto sector ahead of a Brexit that never happened has implications along the European production supply chain.