Efficiency versus GDP

28 Jan 2025 2 min read

Daily update

  • Investors’ sudden discovery of China’s DeepSeek arguably reminds markets of the Fukushima Effect —people adapt when facing adversity (e.g. restrictions on China’s access to technology). On a larger note, output economics and GDP tend to ignore the benefits of efficiency. A culture that venerates GDP is a culture that may miss out on the benefits of a more efficient world.
  • US Treasury Secretary Bessent suggested US consumers of foreign goods could be taxed 2.5%, with the tax rising 2.5 percentage points each month. The direct effect of a 2.5% tax would raise the consumer price for an imported good by around 1%. However, continuously rising prices may also encourage more aggressive profit-led inflation. US President Trump suggested taxes should be higher. However, the US did retreat very quickly from taxing US consumers of Colombian products last weekend.
  • The US government has “temporarily” paused all federal loans and grants, excluding social security and Medicare. The constitutionality of this will be challenged, but that will take time. Ultimately, this money is wages and income of US citizens, who may feel they have to increase precautionary savings.
  • The UK BRC shop price index remains in deflation (though non-food deflation eased a little, following extremely strong demand in December). US consumer confidence data is due.
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