The rising price of drowning sorrows

14 Mar 2025 2 min read

Daily update

  • The recurring risk of a US government shutdown has receded, with some Democrat senators looking to advance legislation. Against the backdrop of damage to “animal spirits” from erratic government policy and taxes, the potential for economic damage from a shutdown would be larger and longer lasting.
  • The US March Michigan consumer sentiment poll is due. The Michigan data does at least break out political partisanship. Democrats’ pessimism is equivalent to that during the 2008 global financial crisis. Republicans’ optimism is stable. If Republican sentiment starts to waver that might signal economic concerns are penetrating partisan presentation.
  • US President Trump suggested extremely aggressive tax increases for US consumers of imported alcohol, with a 200% tariff on European products. Tariff calculations have changed over time, but in scale and target this tax is similar to the eighteenth century UK trade taxes. Those taxes led to a massive increase in smuggling. The economic impact of tariffs tends to decay over time—either because supply chains reroute (per China’s response), or in extreme cases because smuggling increases.
  • French and German final February consumer price data are of little interest to markets, as they almost never change. UK monthly GDP was broadly as expected, but the volatility of the data reduces its market impact.
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