US President Trump鈥檚 confusion

27 Feb 2025 2 min read

Daily update

US President Trump confused investors by appearing to delay taxing US consumers of Mexican and Canadian goods. The White House then 鈥渃larified鈥� that the tax delay was not decided. Such taxes would be very visible to US consumers, at a time when Trump鈥檚 approval ratings on the economy and inflation have fallen, making repeated retreats likely.
Trump threatened to tax US consumers of EU goods by 25% (Trump seems emotionally attached to 25% tax rates). The threat was somewhat incoherent鈥攅ither applying to all imports, or just autos. All imports seems unlikely because price increases would be very visible. Taxing autos could create additional inflation forces via prices of domestically produced cars, second-hand cars, and auto insurance.
Fourth quarter US GDP is due for revision. The consensus is for little change, with the core PCE deflator also staying around 2.8% y/y. This has been pulled higher by non-market prices. Where the forces of supply and demand dictate price changes, core inflation is at 2.4%.
Spanish preliminary February consumer price data points are due. Energy prices will contribute to the headline, but core inflation is likely to be within an acceptable range of around 2% y/y. There are too few forecasts of core inflation to form a clear market consensus, however.