Time for more taxes

31 Jan 2025 2 min read

Daily update

US President Trump reiterated their intention to aggressively tax US consumers of products from Canada and Mexico, possibly excepting oil consumers. Several US refineries are set up to process Canadian and Mexican, not US, oil. The speed of Trump鈥檚 retreat from taxing US coffee drinkers is a reminder of the unpredictability around tariff policy.
How quickly would US consumers experience higher prices? Oil and food prices would likely react within a month. US stock levels determine the timing of other price increases. Second-round price increases also matter. These tariffs partially relate to the war on drugs, but if the political focus shifts to broader inflation perceptions, the duration of any taxes could be short. US egg prices (a campaign focus) have soared since Trump was elected鈥攆ood prices rather than drug prices may matter more.
Inflation is certainly a market focus today. The US December PCE deflator core inflation measure is expected to be stable in year-over-year terms, with food and fuel adding a little to the headline rate. French and German preliminary consumer price data are also due.
German December retail sales were weaker than what six economists predicted (six economists is not really a consensus). With wearisome predictability, the November data has been revised significantly stronger.