Sound and fury

Daily update

US President Trump threatened to impose a 50% tariff on US importers of products from Canada, without exempting products covered by the latest iteration of the NAFTA trade deal. If implemented, the tax would probably push up US consumer prices quite quickly. However, markets offered a muted response—the Canadian dollar and US inflation-linked bonds remaining relatively calm. Investors seem inclined to discount or dismiss such threats.
The sound and fury does carry some economic risks. The US factory building boom peaked in 2024 (at the highest level in over 40 years). Policy uncertainty may have contributed to the rapid slowdown in the past 18 months. All policy is a trade-off, and presumably the US administration thinks the tax revenues, etc. outweigh the costs of uncertainty.
The UK has a new prime minister—and a new Chancellor of the Exchequer, former Defense Secretary Healey. Healey favored economic nationalism in the defense role, but that is hardly unusual in the modern world. The new government does not seem likely to shock financial markets.
UK labor market data is due, and comes hedged with caveats (the UK has arguably experienced structural labor market change, which official data struggles to capture). The German ZEW economic sentiment survey is also due.