Protectionist, or pushover?

14 Feb 2025 2 min read

Daily update

  • Yesterday was US President Trump’s very big announcement on reciprocal tariffs, which turned out to be a plan to investigate taxing US consumers at a future date. Markets had to decide whether the president was being a protectionist or a pushover, and for now are erring toward pushover. The delay is seen as an opportunity to do “deals”. So far, such deals have been more spin than substance.
  • Alongside the big announcement, there were repeated threats to tax imports of specific products (pharmaceuticals, cars, etc.). These threats are presumably for universal tariffs on individual sectors, and are more plausible.
  • US January retail sales data offers a somewhat complicated snapshot of US consumer health before the increased tax burden. Consumers have good reason to spend—real incomes have been rising for some time, and relatively good balance sheets mean additional income is directed to spending rather than saving. Retail sales data does underrepresent the shift to spending on having fun, however. Survey data has hinted at Democrats buying durable goods in anticipation of trade taxes being imposed (though no change in Republican behavior).
  • Europe’s data calendar is light. German wholesale prices and final Spanish consumer prices will be overlooked. Eurozone GDP is due, but markets focus on the regional data.
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