UBS On-Air: Paul Donovan Daily Audio 'Taxing via tariffs'
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US President-elect Trump gave a wide ranging interview, touching on several points that matter to investors. Trump seemed to acknowledge the independence of the Federal Reserve (the chair cannot be dismissed on presidential whim). This will reassure markets. Investors may, howeve
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4 itemsUBS On-Air: Paul Donovan Daily Audio 'US President Trump’s confusion'
The ongoing confusion surrounding U.S. trade tax policy, particularly from President Trump, is dampening investor sentiment and could have significant implications for inflation and consumer prices. Per the full note from UBS, Trump's remarks on delaying taxes for imports from Mexico and Canada have left markets uncertain, especially since higher taxes would burden consumers directly at a time of declining approval ratings for his economic policies. This situation can create volatility in the U.S. dollar, especially should inflationary pressures materialize, as the market assesses the likelihood of higher consumer prices from tariffs on European goods and autos. While the immediate calendar lacks key events, the upcoming GDP data release could shed light on broader economic health, further influencing market expectations around these trade policies.
UBS On-Air: Paul Donovan Daily Audio 'Protectionist, or pushover?'
Per the full note [source], UBS Chief Economist Paul Donovan argues that President Trump's reciprocal tariff announcement is a net negative for the USD due to the delay in implementation, which markets interpret as a sign of weakness. The desk contends that the threat to target value-added taxes (VAT) is non-credible, as no trading partner will abandon such a revenue source. Consensus among FX strategists leans toward further USD depreciation, with the next catalyst being US retail sales data today. The view hinges on whether Trump's social media posts inject sudden volatility, but for now the bias is bearish USD.