Daily update

  • Economists know what they don’t know. US President Trump is expected to announce the largest peacetime tax increase in US history. The erratic nature of trade policy, uncertainty  about whether legal procedures will be followed, limited clarity about end-objectives, the possibility that Trump will again retreat from some taxes, and the unpredictability of patronage-style deals to gain exemptions create uncertainty about the direct effect of the taxes. The second-round effects depend on unpredictable reactions by US companies, a far more complex global trade system than existed 20 years ago, and US consumers whose reaction to inflation has shifted.
  • Does this uncertainty matter? It does. If all-knowing economists are in ignorance, companies and consumers will surely be uncertain about the future. That may impact their economic decisions, changing economic outcomes. Clarity and certainty are now very desirable market commodities.
  • Politics in the US are shifting. Two special election victories in Florida give US Speaker Johnson a larger notional majority in the House of Representatives. However, the elections’ swing in support in favor of the Democrats might impact the position of Republicans with small majorities.
  • The calendar is subordinate to the tax announcements today. There are several ECB speakers (markets are comfortable with an April rate cut). Fed governor Kugler speaks on inflation expectations.
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