Taxing via tariffs

Daily update

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, however, be concerned by the determination to deport migrants established in the US economy.
Trump acknowledged that taxing US consumers of foreign goods via tariffs may be inflationary. There are four ways prices may rise. The tax itself is paid by US importers, and is likely to be passed to consumers. US firms face less competition, allowing them to raise prices. Wages may rise in response to higher prices, pushing up costs. Retailers may engage in profit-led inflation under the narrative of the tariffs. Washing machines are a good example—US tariffs have been repealed, but US washing machine prices are still up 20% from 2017 levels (when prices elsewhere are generally lower).
There are threats of strike action in South Korea after the failure to remove President Yoon from office. The strike threats do not yet include the technology sector, but could disrupt the economy at large.
China’s consumer price inflation was lower than expected in November, with softer food prices. The pressure for proper fiscal stimulus remains.