The dangers of being surprised

Daily update

US President Trump has recently shown an eagerness to change the media narrative. The narrative changed yesterday with speculation about the future of Federal Reserve Chair Powell. That shift might be expensive. Trump declared they had been “surprised” by Powell’s appointment. Trump originally appointed Powell.
The incident may make investors question the strength of rule of law in the US, which matters to reserve currency status. The incident has raised concerns about who Trump might nominate to replace Powell. An obvious political stooge would probably be ignored by markets and the Fed itself. A modern-day equivalent of Fed Chair Burns would be more troubling—superficially independent, but acting as the president’s spokesperson within the Fed.
US June retail sales should not show much tariff impact. While real incomes are starting to be challenged by trade taxes, the initial response of consumers is to maintain living standards by using credit and savings.
US June import and export prices matter. Import prices are pre-trade tax. If they deviate from previous trends (and those trends might be deflation), that suggests exporters are adjusting to take some of the cost of the taxes. If they follow established trends, the burden of trade taxes falls entirely on the US part of the supply chain.