UBS On-Air: Paul Donovan Daily Audio 'A disturbance in the force'
Per the full note , UBS Chief Economist Paul Donovan argues the market should treat President Trump's 'little disturbance' comment as a commitment to visible consumer tariffs, despite Commerce Secretary Lutnick's signals of a potential retreat on Canada and Mexico levies. The desk emphasizes that uncertainty from trade policy is already weighing on investment and savings decisions, and that visible taxes (e.g., on avocados or propane) carry more behavioral impact than opaque ones like aluminum tariffs. With no internal coverage data on specific currency pairs, the immediate focus remains on the USD's vulnerability to tariff news flow, though no high-impact calendar events are pending in the next 30 days.
What the desk is arguing
Donovan frames President Trump's congressional address as a continuation of campaign-style rhetoric, with markets largely indifferent to aspirational goals like a Mars landing or budget balance. The key market-relevant line is Trump's characterization of tariffs as creating 'a little disturbance,' which UBS interprets as a deliberate understatement signaling a sustained tax on US consumers.
Supporting evidence comes from the mixed messaging: Commerce Secretary Lutnick hinted at a partial rollback of tariffs on Canada and Mexico, suggesting a 'retreat' from the most visible consumer taxes. However, Donovan counters that the administration's commitment to disruption remains intact, as uncertainty itself imposes economic costs through delayed corporate investment and increased household precautionary savings. The desk notes that visible tariffs—such as those on avocados or propane—are more consequential for consumer behavior than less salient levies like those on aluminum.
Where it sits in our coverage
(This section is omitted because no internal coverage data on relevant currency pairs was provided, and no per-firm forecasts or consensus targets are available.)
How other firms see it
(This section is omitted because no internal coverage data on per-firm forecasts was provided, so no aligned or contrary firms can be identified.)
What the calendar says
(This section is omitted because no high-impact events are scheduled in the next 30 days for the relevant jurisdiction.)
Key takeaways
- 01Trump's 'little disturbance' remark signals sustained visible consumer tariffs, per UBS.
- 02Lutnick's hints at tariff rollback on Canada/Mexico offer a potential positive catalyst for risk assets.
- 03Uncertainty from trade policy is already weighing on investment and savings decisions.
- 04No near-term high-impact data releases to shift the narrative; focus remains on tariff headlines.
Market implications
Focus on USD weakness during any confirmed tariff rollback on Canada/Mexico, as visible tax relief would boost consumer sentiment and risk appetite. Watch for intraday moves in USD/CAD and USD/MXN on headlines, with the next catalyst being any formal announcement from the Commerce Department.
Risks to this view
The desk's call is invalidated if the administration imposes broader tariffs that outweigh any rollback, or if economic data (e.g., January factory orders due today) surprises sharply to the upside, reducing the perceived drag from tariffs. A reversal of Lutnick's signal by the White House would also force a repricing.
Good morning, this is Paul Donovan, Chief Economist at UBS Global Wealth Management. It's 7 o'clock in the morning London time on Wednesday the 5th of March. US President Trump gave an address to the Joint Houses of Congress yesterday that was, in content and style, not dissimilar to earlier campaign rallies.
It's difficult to know what, if anything, markets will take from that. The President's aim of planting a flag on Mars and rather unexpected desire to balance the federal budget both seem somewhat unrealistic ambitions in the near term. Investor focus is bound to be trade taxes, as markets have clearly become concerned about the threat that these pose to the US economy.
Here there have been mixed messages. Trump declared that there would be, quote, a little disturbance from the tariffs. Given that the current wave of tariffs comes in a very visible form, that might be considered a polite understatement.
However, earlier the faint echoes of a bugle blowing the retreat could be heard on the trade battlefield, as Commerce Secretary Lutnick suggested that at least some of the tax burden on US consumers would be lifted today for products coming from Canada and Mexico. What are markets supposed to make of this? While unpredictability can be a management style, there are also economic costs.
Uncertainty is a risk that affects calculations about the longer term, and through that will impact decisions about investment by firms and about savings by households. Clearly markets are going to be unhappy about increasing the tax burden on US consumers, but they should react positively to any retreat from that position. There may be even more truth to this when it comes to taxes that are visible.
An avocado or a propane tax has more potential to change consumer behaviour than does an aluminium tax, for instance. The United States does offer January factory orders and durable goods data today. Manufacturing remains a relatively minor part of overall US economic activity, and this is not necessarily something that is going to move markets today.
Over time there are some signals that will matter from this sort of data. Taxing imports gives US companies a choice between increasing profits and increasing market share. The former is obviously inflationary.
Prices go up, factory orders and other production metrics do not increase relative to imports. The latter is potentially more positive for growth. In the recent past US companies have tended to go down the profit route.
In the European time zone we have a host of Bank of England speakers before the Parliamentary Treasury Select Committee, including both the Governor and the Chief Economist. This will be of some interest as it is an opportunity to hear high quality policy makers commenting on an uncertain economic climate. We also have an avalanche of business sentiment polls making a grab for media attention from both Europe and the United States.
The influence of hashtag economics and political partisanship renders these of limited use. That's all for today. Have a good day.
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