Markets start to fret

28 Feb 2025 2 min read

Daily update

Equity markets reacted to social media posts from US President Trump. Trump is often more coherent on social media than in off-the-cuff comments, and these remarks made clear an intention to hike taxes鈥擴S buyers will need 25% more cash to buy goods from Canada or Mexico, and another 10% cash to buy from China. The China threat is credible, and in line with our expectations. Markets are not inclined to believe the threats to tariff goods from Canada and Mexico.
Crying 鈥渨olf鈥� on tariffs has economic implications, even if taxes never appear. There is some evidence of consumers buying earlier out of fear of tariffs (perhaps more Democrat consumers than Republican). Firms may raise prices ahead of tariffs. Because businesses invest in an uncertain future, increasing uncertainty affects investment risks.
German January retail sales grew less than expected compared to December, but past data was revised notably higher. This is a repeating trend. Using just the initial releases, German retail sales fell over 21% in the past couple of years. After revision, that decline is less than 4%.
US personal spending data may give hints as to consumers shifting spending to accommodate tariffs. Germany and France both offer consumer price inflation figures, and France supplies fourth quarter GDP data too.