Tea parties become more expensive

Daily update

US President Trump implemented an extraordinary tax increase on US consumers overnight. If the 104% tax increase on goods from China is not reversed, it is likely to push the US into recession more rapidly. China’s economy is negatively impacted—but the larger each round of tariffs, the less their marginal impact on foreign growth. USD 55 million of tea imported from China is subject to the 104% tax (in 1773 the UK cut tea taxes).
For years the US persuaded foreigners to exchange US government promises for valuable goods and services. That exchange is threatened—despite equities falling yesterday, bond yields rose sharply. The Federal Reserve would intervene if the bond market became disorderly (if China dumped Treasury bonds, for instance)—as the Bank of England did in the Truss debacle. A weak but orderly market does not merit intervention.
The US further increased the tax on de minimis goods from 2 May. This means that US consumers will pay taxes on small parcels. Politically a “Temu tax” visibly tells voters that tariffs raise prices, and domestic consumers pay.
Public disagreements between the people around Trump increase uncertainty about trade policy—and also about the prospect for trade deals; disagreements make it unclear what the administration’s objectives are.