Tax and retreat

07 Mar 2025 2 min read

Daily update

Having imposed aggressive taxes on US consumers at the start of the week, US President Trump partially retreated from taxing Mexican and聽 Canadian imports yesterday (assuming goods are compliant with the revised NAFTA). The taxes are delayed until 2 April, but markets will likely price in more retreats.
Some Mexican and Canadian imports are still taxed (including some cars, now experiencing their fourth tax regime this week). There US consumers will need to find 27.5% of the price to pay to the US government. This week鈥檚 tax and retreat has incurred an economic cost. Uncertainty has risen for companies and financial markets, with some questioning whether the US government has聽 a coherent policy.
Today鈥檚 US employment report will not really reflect government job losses, because the government is not a significant employer and because timing will push the losses into later months. The main future employment hit is likely to be from private sector businesses that depend (directly or indirectly) on government employment.
China鈥檚 import and export data for February were both weaker than expected. The import numbers do not suggest a strong domestic consumer at the moment. German January factory orders data is also due.