No reset to factory settings

Daily update

The US trade court ruled that about half of US President Trump’s trade tax increases are illegal. Markets reacted positively, but the US has not been reset to its factory settings.
For now, the court ruling lifts a significant tax burden from US consumers and companies. However, the main outcome is uncertainty. The decision will be appealed; the Supreme Court may again prefer Trump to precedent. Trump may use other legislation to reimpose taxes. Existing trade negotiations (and the UK’s non-binding trade agreement) are questioned—why talk seriously if the US stance is unclear? Perhaps most important, why would companies invest or hire in the US when taxes on their supply chains and on their customers’ spending power remain unclear?
Where taxes have been collected, it seems they will not be returned. Existing price increases are likely to stay. However, even if tariffs remain in place during the appeals process, companies may choose to temporarily delay new price increases in the hope taxes will be overturned, pushing US inflation increases later.
The Federal Reserve meeting minutes confirmed a “wait-and-see” policy approach, which additional policy uncertainty will reinforce. We get revised first-quarter US GDP data today—an imprecise number, and distorted by front-loaded purchases by companies and consumers.