Podcast appearances and mentions of Paul Donovan

US President Trump announced the start of a new wave of taxes on US consumers, with a 25% tax on US citizens who want to buy products from South Korea and Japan. Other countries' exports also received higher tax rates, but it seems a wasted effort to analyze every Trump social media post when investors understandably anticipate future retreats. Japan and South Korea accounted for around 8.5% of US imports last year, so this tax increase adds 0.1 to 0.2 percentage points to consumer price inflation.

The additional taxes US President Trump intended to impose on US consumers from Wednesday will now be delayed until 1 August. That means that, allowing for some stockpiling ahead of Christmas, consumers may not experience the inflation spike from these taxes until January next year—assuming that Trump does not retreat again.

The US June employment report was strong enough in the headline to dispel ideas of a sudden US interest rate cut. It was troubling enough in the detail to suggest a more negative outlook for the US economy. Job creation was very narrowly focused.

Tomorrow's US holiday means US labor market data appears today. There is a hint today's report may be weak. US presidents normally see the data the night before release. Last night, US President Trump issued a social media post calling for Federal Reserve Chair Powell to resign. Policy uncertainty and the largest tax increase in modern times are more likely to damage the labor market than Fed policy, but the post might signal weaker data.

The US Senate passed legislation to enshrine an unsustainable fiscal position into law. The bill goes to the House, where it may run into difficulties. Some fiscal conservatives are unhappy with the unsustainable part of US fiscal policy. Markets are not likely to react to squabbles over details—unsustainable US fiscal policy is well understood, and the economic effects of redistributing from lower income to higher income households will take time to emerge.

The US administration seems to be retreating from the idea of “90 trade deals in 90 days”. With less than a week to go, they have a half-hearted agreement with the UK and a de-escalation with China, and little else. The idea is that interim agreements will be sought, retaining the 10% tax on US consumers of foreign products. Uncertainty about future product-specific taxes appears to be making it more difficult to do deals.

Over the past few days, Canada and the US stopped talking about trade, and started talking about trade again. Unusually, this was not a unilateral retreat by the US—Canada surrendered its digital services tax. Markets, quite rightly, are ignoring all of this. US President Trump cut taxes on US consumers of UK cars—from today the tax goes to 10%.

Necessary reading for those interested in the trends shaping wealth, the report covers 56 markets and more than 92 per cent of global wealth. Featuring insights from UBS economists Paul Donovan and James Mazeau.See omnystudio.com/listener for privacy information.

Japan exhibited some disinflation with the June Tokyo consumer price data. Using the international definition of core inflation, the rate slowed to 1.8% y/y. A lot of the headline inflation seems to be driven by non-fresh food, perhaps suggesting relative price shifts rather than strong, broad inflation momentum.

The Wall Street Journal reports US President Trump may announce the next Federal Reserve Chair in September or October. The Senate needs to confirm the Chair, and in Trump's first term was prepared to oppose several of Trump's Fed nominees. Only convention prevents the Fed from overruling the Chair—an obvious political appointee may be ignored by the FOMC. The greatest threat to policy independence would be someone who was not an obvious political puppet but was swayed by Trump's instructions.

In the US yesterday, Federal Reserve Chair Powell delivered a speech to members of the House of Representatives (most of whom are not economists). The main messages were: no rush to cut rates, and trade taxes create uncertainty. This will not surprise markets. There was a further softening of the data dependency mantra, as Powell focused on future inflation as a reason to keep rates unchanged for now. Powell testifies again today.

Iran and Israel seem to be saying “if they stop, I'll stop”, although there were some missile exchanges overnight. That is enough for markets, with oil prices back to the levels of a couple of weeks ago (wiping out the potential economic impact). As with situations like North Korea, investors are not inclined to give weight to extreme tail risks, so things like the location of enriched uranium will be overlooked.

We live in a world of political polarization and soundbite economics. That encourages sensationalism. Deckchair generals will offer extreme opinions on the US attacks on Iran. Both supporters and opponents the attacks are likely to dramatize events. Investors should be cautious of knee-jerk overreactions.

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European powers begin nuclear talks with Iran, and the US has signaled that it does not intend to decide on military strikes against Iran for two weeks. That means two weeks of uncertainty for financial markets, but investors are still inclined to see the Middle East conflict as a local, not a global, economic issue.

The US Federal Deserve did as expected yesterday—nothing. The Fed's dilemma can be summed up by a comment from US President Trump (in a different context) “I mean, nobody knows what I'm going to do”. The uncertainty about trade taxes, fiscal policy, and the reactions of US companies and consumers means (as Fed Chair Powell noted) there can be very little certainty about the future path of interest rates.

Yesterday's US data flurry gave hints about trade tax effects. Headline retail sales were weakened by poor auto sales. Some consumers bought cars early, anticipating trade taxes, and so did not show up at car dealerships in May. Import prices rose, suggesting that foreign companies were not absorbing trade taxes (so US companies and consumers will pay). Japan's May trade data did show a 4.7% m/m drop in passenger car export prices, suggesting Japan's automakers were absorbing some of the tariffs. Only auto prices showed this shift, which should appear in June's US import price data.

Die Welt wird reicher: Wie ein neuer Bericht der UBS zeigt, steigt das globale Vermögen 2024 um 4.6 Prozent an – Spitzenplatz beim Durchschnittsvermögen belegt weiterhin die Schweiz. Zudem habe die Vermögensungleichheit leicht abgenommen, so UBS-Chefökonom UBS und Vermögensverwalter Paul Donovan. SMI: -0.4%

US President Trump left the G7 summit a day early. Their departure does not change much of substance—the US was resisting a joint statement on Iran-Israel. However, there is symbolism about Trump's willingness to cooperate with others. An executive order to implement some of the UK trade agreement was signed, but little progress seems to have been made with Japan.

The ongoing exchange of missile strikes between Iran and Israel this weekend has not had a major impact on financial markets. The severity of Israel's initial strike against Iran was unexpected and caused a reaction. Further market moves would be justified only if there were expectations of even more disruption to energy supplies or shipping lanes.

The scale of Israel's air strikes against Iran were not anticipated by financial markets (US President Trump having suggested a deal with Iran was close, just yesterday). As a result, the oil price has had the largest spike since Russia's invasion of Ukraine. The economic disruption may well be contained—the starting point was quite a weak oil market, given expectations of a US growth slowdown.

Yesterday's US consumer price inflation data showed, as expected, faint hints at the effects of trade taxes and clearer examples of weak demand. The declining number of people wishing to visit the US helped weaken air fares. Goods where inventory is held for longer (like autos) avoided tariff effects for now. Imported goods with shorter inventory times—like bananas—saw price surges. Large consumer appliances had the second largest price increase on record. Producer price data may show more tariff price effects, as these goods sit closer to the point of import in the supply chain.

US President Trump has declared trade talks with China “not easy”. There may be a difference between the administration's perception of its bargaining position and reality. With the 90-day deadline to do deals approaching, no deals have yet been made—and the UK trade agreement has not come into effect. There are suggestions that Trump will retreat from export restrictions on chips in exchange for some so-called “rare” earths.

Media coverage of events in Los Angeles has been intense. There are economic and financial market consequences, but domestic and international investors may react differently. Domestic investors' views will be shaped by their chosen cable news channel, and potentially by fake news on social media. International investors' perceptions of risk will be affected by their own experiences of protest, civil unrest, militarization, and secession.

The US May employment report is due, with the regular reminders that this data has become increasingly unreliable in recent years, and average earnings are not wages. This month's data will correct errors that crept into last month's data. Signs of weakness in restaurant and leisure travel sectors mean fewer lower paid workers may be employed, raising average earnings without affecting wages. But, the Federal Reserve's “data dependency” means the labor market is seen as a trigger for policy action.

A total of 52 out of 52 surveyed economists expect a quarter point ECB rate reduction today. How could so many economists possibly be wrong?

US President Trump's mega-donor Musk was strongly critical of the “big, beautiful bill” currently before Congress. The bill contains many things markets are worried about. Musk's opposition may embolden some Republican senators to oppose parts of the bill (Musk has more money than Trump, but their recent political forays have not been universally successful).

Reports in Washington suggest US President Trump may talk directly with China's President Xi later this week (after several days of more heated rhetoric between the US and China over trade). As Trump has been anxious for the call, and China has not, this may hint at more US retreats over trade taxes as a concession to bring China to the telephone.

US President Trump doubled taxes on US consumers of imported steel on Friday, and (so far) has not retreated from that tax increase. Trump reacted angrily when confronted with the Financial Times acronym “TACO”, and the implication that markets expect Trump to reverse policy rapidly. Investors may worry that Trump persists with these taxes, not because of some economic objective but instead as an emotional reaction to market perceptions of their negotiating stance.

There is yet more uncertainty in the US economy. US President Trump appealed the ruling that their trade taxes were illegal. While this is decided, the taxes stay. There are thus three layers of uncertainty. Will the taxes survive? If they are illegal, will US companies and consumers get refunds? And are trade taxes today actually being collected? There is also uncertainty around how US companies will react to this uncertainty, especially with pricing.

The US trade court ruled that about half of US President Trump's trade tax increases are illegal. Markets reacted positively, but the US has not been reset to its factory settings.

Equity markets seemingly rallied on optimistic comments from US President Trump around trade. So much focus on the words of one individual is unusual. Trump has the power to limit future economic damage from new trade taxes, but cannot undo the damage of past policy swings. For example, comments in yesterday's sentiment data highlighted that companies are delaying decisions in the face of policy uncertainty, even as Trump retreated from some tariffs.

The US long weekend was marked by aggressive policies and then a retreat, but that still leaves its mark on financial markets. The US dollar remains near its recent lows against major currencies. Investors are concerned that the retreats may not be comprehensive, and that economic behavior will still have to adjust to accommodate wild policy swings.

US President Trump has retreated from their threat to aggressively tax US consumers of European products, delaying the suggested 50% tariff to July. These retreats are so frequent that investors should rationally expect them. So why do markets still react to the initial announcements, as happened last Friday?

Administration comments suggest US President Trump is willing to increase taxes on US consumers of EU-made products, if the EU does not make unilateral concessions on tariffs. Markets are unlikely to place too much weight on these threats given the president's tendency to rapidly retreat on such issues, but the situation does (again) increase policy uncertainty.

US President Trump labelled the budget proposal trying to pass Congress a “Big Beautiful Bill.” BBB might be an unfortunate alliteration given concerns about the US credit rating. The details of the budget are constantly changing, so their effects are hard to judge, but the broad impact is to push the US further along a rising debt path. Bond investors are less than happy.

US President Trump urged Congress to pass the “big, beautiful” budget. An International Monetary Fund (IMF) official urged the US to consider its unsustainable debt level, which this budget will likely make worse. The redistribution effects of the tariffs, spending cuts, and tax cuts does have long term implications. In the short term, the deficit's size is likely the focus.

The key message from yesterday's pontification of Federal Reserve speakers was “uncertainty”. Uncertainty about policy, uncertainty about how companies and consumers would react to that uncertainty, uncertainty about second-round effects from tariffs, and so on. The result is a wait-and-see approach from the Fed. The risk is that a reactive policy may come too late to correct any economic damage from all the uncertainty.

A credit rating agency (it does not matter which) downgraded the US from something to something else. US President Trump's current policies are unlikely to place the US on a sustainable debt path. Influential donor Musk's DOGE efforts are unlikely to reduce the deficit. Market reactions should be muted—there is little new information. Administration officials attempted to frame the decision in a political context, but some comments also suggested a limited understanding of the ratings process.

A credit rating agency (it does not matter which) downgraded the US from something to something else. US President Trump's current policies are unlikely to place the US on a sustainable debt path. Influential donor Musk's DOGE efforts are unlikely to reduce the deficit. Market reactions should be muted—there is little new information. Administration officials attempted to frame the decision in a political context, but some comments also suggested a limited understanding of the ratings process.

US consumer price inflation did not show many trade tax consequences. The slowing of tourism-related prices might reflect how visitors are wary of entering the US, but complications in timing Easter's effect are also relevant. Appliance price inflation is a concern (the fastest monthly increase since early 2022 may reflect firms anticipating trade taxes).

Investors are inclined to view US President Trump's early retreat from trade taxes on imports from China as significant, not just for themselves but as a signal of a willingness to capitulate to other countries. Markets are not inclined to take Trump's threats of future possible tax increases seriously.

Sino-US talks over the weekend were described by US Treasury Secretary Bessent as making “substantial progress” on trade. Presumably so important a comment was cleared by US President Trump. The only real issue investors care about is how far the US will retreat on trade taxes. Current tariffs effectively halt bilateral trade. An 80% tariff (suggested by Trump) would also effectively halt bilateral trade. A tax of 20% would damage the US economy, but allow trade to continue.

Yesterday's Anglo-US trade framework was preceded by substantial media spin but ultimately revealed only minimal substance. US consumers are worse off than in January, though better off than a week ago. Some UK exporters get better conditions, some US exporters might get better conditions. Yesterday's Bank of England's rate cut was a more important economic event.

Federal Reserve Chair Powell pointed out that uncertainty had risen, and that inflation and unemployment might rise. These are all eloquent statements of the obvious. leaving the Fed reacting to data. Central banks that react rather than pre-empt data tend to be late in changing policy. Economic data is also increasingly less reliable, making data dependency more dangerous.

India conducted military strikes against Pakistan, and Pakistan's defense minister has pledged retaliation. Investors appear to be expecting a relatively contained situation. It is unlikely that global risk appetite will be affected by these events.

The manufacturer of Barbie dolls has warned that higher prices are coming to US consumers, as a direct consequence of tariffs. Moving production to the US does not seem to be an option. Rationing dolls to two per child while raising prices has limited consequences, but US President Trump has signaled medicines will be next. Rationing medicines with higher prices may have more significant consequences (raising health insurance prices, for instance).

Investors await the Federal Reserve's Wednesday policy decision. There is little expectation of a rate change. Preliminary April employment data showed reasonable strength although some areas of job growth (e.g. trucking) are clearly vulnerable as import volumes slow.

The US “Temu tax” takes effect at midnight, whereby US consumers pay their government for the privilege of buying low cost products directly from China. The tax is unlikely to show up in consumer price data (it is doubtful that Temu prices are used in the calculation), but it is a visible price increase to many US consumers—a reminder that they, not exporters, pay trade tariffs.

The only certainty economists have about yesterday's first-quarter GDP data is that it is wrong. Declining survey response rates and economies that structurally change more rapidly than statisticians can measure have conspired to make GDP everywhere subject to more frequent and larger revisions. Nonetheless, broad trends show an economy being rapidly shaped by US President Trump's policy.