Inflating trade’s importance

Daily update

China halted the import of Boeing planes; US President Trump asked China to call him, and then imposed permanent restrictions on NVIDIA chip sales to China; EU leaks suggest negotiators do not believe the US knows what it wants from trade talks. Economic nationalism remains alive and well and includes capital flows. US TICS capital flows data is due today (but misses large amounts of foreign activity in US capital markets).
Some politicians may believe trade is more important than it is. Trade does matter economically, but a “made in China” product in a store does not mean all the price paid goes to China. A product “made in China” represents the work of many countries. A majority of the consumer price is post-production layers of domestic value added. Imported goods are a small part of a developed economy.
China’s first quarter GDP was reported stronger than expected. With economic data everywhere becoming less precise, to the extent investors believe the numbers, they are unlikely to care—larger US companies were stockpiling goods and components ahead of the Trump trade taxes. US March retail sales may show consumers frontrunning tariffs.
UK March consumer price inflation was marginally lower than expected. It is not a major shock, but supports the idea of further Bank of England rate cuts.