Policy competence questions

Daily update

US President Trump retreated from more trade taxes on Friday, exempting iPhones and some other electronics from much of the 145% tax on imports from China. This would have been a very visible tax increase. While consumers tend to be sensitive to the price of high frequency purchases like food and fuel, a roughly 60% increase in an iPhone’s consumer price from trade taxes would be noticed.
Over the weekend, Trump partially retreated from the retreat, emphasizing that a 20% tax would apply and additional unspecified taxes on technology are coming. This erratic policy making leads to investors questioning the existence of a competent plan.
China’s March export data surged, presumably as US firms stockpiled ahead of draconian US taxation. Some exports to the US will be indirect. Today, a battery made in China is taxed 145% by the US. A battery made in China and installed in a Vietnamese-made computer is taxed 10%. Stockpiling by US firms may delay (but cannot prevent) the coming US inflation spike.
There are Federal Reserve speakers scheduled, including Fed President Harker on the role of the Fed. There is a serious risk that the Fed’s independence could be challenged; we may hear more about the value of an independent central bank.