Daily update
Daily update
- US President Trump threatened more taxes on US consumers, focused on autos, pharmaceuticals, and semiconductors. Trump rapidly retreated from trade taxes that would be very visible to US consumers—Gen Z would notice tariff-induced inflation for avocado on toast. Less visible taxes (like aluminum) have endured. The new proposals are partially visible—taxing new cars raises second-hand car prices and the cost of car insurance—but probably sufficiently disguised as to prevent a repeat retreat.
- General inflation perceptions may impact the willingness to tax US consumers further. Consumers’ inflation perception is guided by high frequency purchases (food and fuel). Egg prices are an example of a relatively unimportant part of consumer spending that has a disproportionate impact on inflation perceptions. The Trump administration recently fired a number of people trying to contain Avian ‘flu.
- UK inflation data had food and fuel prices pushing up headline inflation, but the underlying details were more benign. VAT (a sales tax, not a tariff) on private school fees added to inflation, but the overwhelming majority of the UK population do not pay this price.
- The Federal Reserve January meeting minutes are due. Reactions to tariff proposals will be looked for, but uncertainty around government policies limits the value in any forward-looking statements.