Daily update
Daily update
- Former US President Trump suggested tariffs of up to 2,000% on cars imported from Mexico (an unconventional interpretation of NAFTA). US and European investors have viewed proposed tariffs as a bargaining device, not to be taken seriously. The random suggestion of numbers like 2,000% does suggest more rhetoric than rigorous policy analysis. However, the repeated theme of trade taxes implies the policy is important.
- The proposed universal tariff of 20% paid by US consumers of any imported product would be disruptive. The US imports more now than did in 1971 (the last universal tariff). It uses more imports to manufacture exports, risking a competitive disadvantage. A tariff is applied to the import price, not consumer prices, so a 20% tariff should raise consumer prices for imported goods less than 10%. Retailers may use the narrative of a 20% tax to raise their prices more than the tariff cost alone, however.
- Media reports suggest Israel has reassured the US that it will not target Iranian oil facilities. This has reduced the risk premium in the oil price.
- UK September inflation data were lower than expected, with air fares and fuel costs helping to slow consumer price inflation. Goods prices overall remain in deflation, with most market determined service sector prices in disinflation.
