Podcast appearances and mentions of Paul Donovan

With continuing uncertainty and volatility prompted by Trump, trade, tariffs and more, Paul Donovan of UBS tracks the latest economic and geopolitical developments in order to help investors stay focused.See omnystudio.com/listener for privacy information.

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.

Online retailer Amazon denied reports it would publish the tariff impact on the price of each item sold on its US website. The general lack of tariff transparency risks higher US inflation by enabling retailers to indulge in profit-led inflation—blaming tariffs for price increases that actually raise profit margin. Lack of transparency also risks consumers blaming tariffs for every price increase, reducing confidence and threatening growth.

US President Trump is to mark their 100th day in office with a partial retreat on auto-part trade taxes, and a speech. The speech risks further erratic policy pronouncements—Trump declared very negative approval ratings to be “fake news”, but may want to blame external forces for their poll performance. That might lead to policy pronouncements on immigration, trade, or some other economically significant issue. Uncertainty about such policy shifts has economic consequences.

Last Friday's US data showed a notable improvement in late April consumer sentiment, but only for registered Republicans. Consumers today are buying goods imported before the oppressive burden of trade taxes (on average, it will take about three months for pre-tax inventory to be used). This means economic reality has not penetrated the partisan media bubble around consumers. Businesses are faster to react, with uncertainty fueling a collapse in US port activity as companies “wait and see”.

China said it was not negotiating with the US over trade. US President Trump avowed that the US was talking with someone (who they are talking to is a secret, apparently). Things like this might possibly be contributing to the economically damaging levels of uncertainty. The US and South Korea have agreed a framework for trade talks (North Korea escaped US tariffs). South Korea and the US had a free trade deal with no tariffs at all until a few weeks ago.

The Federal Reserve's Beige Book has biases. The businesses that provide anecdotal evidence will have an agenda, and the Fed economists who edit the anecdotes into coherence understand the economics of trade. Nonetheless, the latest edition used “uncertainty” 80 times—more than twice the references during the pandemic or the global financial crisis. Erratic policies are having an economic impact, and that seems to have penetrated partisan media bubbles.

With investor concerns growing, US President Trump demonstrated the art of the retreat. They stated they had “no intention” of firing Federal Reserve Chair Powell. Trump may not be able to (legally), but markets will still have lingering concerns about Fed independence. Trump also said they would be “very nice” in any trade negotiations with China, raising hopes that the tax burden on US consumer may lessen.

US President Trump again called for lower US interest rates. Markets interpreted this as undermining Federal Reserve independence, and markets do not like that (US assets weakened). The coming US economic slowdown is driven more by rising risk than high rates. Borrowing to fund investment and consumption balances the cost of capital with uncertainty about the future. Rising uncertainty is the US problem.

US National Economic Council Director Hassett said US President Trump was investigating whether they could fire Federal Reserve Chair Powell. Investors seem less than happy with the idea of a politicized Fed—the US dollar and long-dated government bonds have weakened. There are checks on the president's authority. Fed governors need to be confirmed by the Senate. The FOMC chair does not have to be the Fed chair. However, some of these checks depend on rule of law.

While the US dollar has been the dominant – but not the only – reserve currency since 1947, its role has been eroded as other currencies have gained market share. UBS’s Paul Donovan explains what might happen next.See omnystudio.com/listener for privacy information.

Federal Reserve Chair Powell noted US President Trump's trade taxes would raise inflation and lower economic growth. Markets have already worked this out, but Powell saying it has policy implications. On the evidence of (unreliable) sentiment surveys, over a third of US consumers think inflation will exceed 10% this year. Powell emphasized longer-term inflation expectations, which should still allow for rate cuts. The self-inflicted nature of the economic slowdown may limit the number of cuts.

In the short period following early April's “Liberation Day” announcement of tariffs by the White House, questions remain amongst global investors as to whether the world is headed towards a protracted trade war, and a new regime of significantly higher tariffs. What might this all mean for Europe? Which sectors are most at risk? How can investors position portfolios accordingly? Paul Donovan, Chief Economist for UBS GWM, weighs in on these questions, along with co-hosts Christopher Swann and Belinda Peeters.

China halted the import of Boeing planes; US President Trump asked China to call him, and then imposed permanent restrictions on NVIDIA chip sales to China; EU leaks suggest negotiators do not believe the US knows what it wants from trade talks. Economic nationalism remains alive and well and includes capital flows. US TICS capital flows data is due today (but misses large amounts of foreign activity in US capital markets).

US President Trump appears “very happy” with the economic consequences of trade taxes to date, and is therefore proposing to add to US consumers' tax burden with levies on computer chips and pharmaceuticals. The tax on chips will probably reverse some of the effects of the retreat from taxing smartphones.

US President Trump retreated from more trade taxes on Friday, exempting iPhones and some other electronics from much of the 145% tax on imports from China. This would have been a very visible tax increase. While consumers tend to be sensitive to the price of high frequency purchases like food and fuel, a roughly 60% increase in an iPhone's consumer price from trade taxes would be noticed.

The ninth annual Art Basel and UBS Global Art Market Report, compiled by Dr Clare McAndrew of Arts Economics, provides a comprehensive, macroeconomic analysis of the state of the global art market in the past year. It examines the industry’s various segments, including galleries, dealers, auction houses and art fairs, and assesses their performance against the backdrop of changes in global economics and wealth. We hear from McAndrew, Art Basel CEO, Noah Horowitz, and Paul Donovan of UBS. See omnystudio.com/listener for privacy information.

Today's guest is Paul Donovan, Chief Economist of UBS Global Wealth Management. In today's episode, Paul discusses the impact of structural changes in the economy, particularly in relation to flexible working and demographic shifts. The discussion also touches on the disparities in innovation between the US and Europe, the ongoing trend of spending on experiences rather than goods, and the role of AI in enhancing productivity. (0:00) Starts (2:37) Economic uncertainty, tariffs, and inflation (12:41) Consumer behavior & spending trends, and perceptions (18:22) Japan's economic shifts and demographic challenges (21:38) Reliability issues in economic data and surveys (31:44) Bad economic policies (38:36) The role of the dollar in the global financial system (44:41) Investment perspectives Recorded April 2, 2025 ----- Follow Meb on X, LinkedIn and YouTube For detailed show notes, click here To learn more about our funds and follow us, subscribe to our mailing list or visit us at cambriainvestments.com ----- Sponsor: YCharts enables financial advisors to make smarter investment decisions and better communicate with clients. Their latest white paper compares four different rebalancing strategies covering 29 years of data. Download here. ----- Follow The Idea Farm: X | LinkedIn | Instagram | TikTok ----- Interested in sponsoring the show? Email us at Feedback@TheMebFaberShow.com ----- Past guests include Ed Thorp, Richard Thaler, Jeremy Grantham, Joel Greenblatt, Campbell Harvey, Ivy Zelman, Kathryn Kaminski, Jason Calacanis, Whitney Baker, Aswath Damodaran, Howard Marks, Tom Barton, and many more.  ----- Meb's invested in some awesome startups that have passed along discounts to our listeners. Check them out here!  ----- Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com). Learn more about your ad choices. Visit megaphone.fm/adchoices

US President Trump's administration clarified the 125% tax on imports from China was 145%. This increase will not shift demand patterns (it will cost US consumers more money). For investors, this raises policy competence questions again. A well-planned trade tax would consider costs. Tax rates set seemingly at random question whether costs are properly considered.

US President Trump's retreat from trade taxes took less than 24 hours. However, taxes on imports from China increased, and the universal 10% import tax stays in place. None of these taxes existed a week ago, and US consumers will have to use income to pay them. Higher taxes on specific products remain, and more are promised.

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).

Financial markets swung wildly yesterday on apparently false reports of a 90-day halt to US trade taxes (except for China). The volatility highlights two problems. Erratic policymaking means stories of dramatic shifts in policy are credible. The move toward Schlesinger's “imperial presidency” model means policy shifts depend on the whims of one person. These make fake news plausible, creating market volatility.

Asian equity markets crashed, with Hong Kong markets down over 10%. Over the weekend, US administration officials gave contradictory statements on trade taxes, causing investors to question the existence of a masterplan. Attempts to justify attacks on the Heard Island penguins only emphasized the peculiarity of the tariff formula. US President Trump took time from their golf weekend to twice post that equity declines were “on purpose”.

Financial markets expected a significant tax increase from US President Trump. Yesterday's reaction shows the tax increase was worse than anticipated. US dollar weakness is telling. We often hear that when the US sneezes the global economy catches cold. This is not the US sneezing. This is the US cutting off its own arm. The self-inflicted economic cost naturally weakens the dollar. Federal Reserve Chair Powell speaks today on the economic outlook.

US President Trump unveiled a massive tax increase for US companies and consumers. Tariffs were set at (0.5 x bilateral trade deficit / US imports). This is a predictable formula, completely unrelated to trade openness. The uninhabited Heard and Macdonald Islands get a 10% tariffs (will the penguins retaliate?). This may cause investors to question the competence of the administration's trade policy.

Economists know what they don't know. US President Trump is expected to announce the largest peacetime tax increase in US history. The erratic nature of trade policy, uncertainty about whether legal procedures will be followed, limited clarity about end-objectives, the possibility that Trump will again retreat from some taxes, and the unpredictability of patronage-style deals to gain exemptions create uncertainty about the direct effect of the taxes. The second-round effects depend on unpredictable reactions by US companies, a far more complex global trade system than existed 20 years ago, and US consumers whose reaction to inflation has shifted.

A social media post from a semi-official China account suggested that China, Japan, and South Korea would present a united front against US trade taxes. Korean officials suggested this might be exaggerated, but the fact that this is remotely plausible reflects the reconfiguration of how the world works (or does not work). China and Japan are the two largest central bank holders of US dollar assets.

Overnight US President Trump's influential donor Musk reiterated a desire to “end the Fed.” Abolishing the Federal Reserve is part of the reported Project 2025 blueprint. This sort of talk, immediately ahead of significant trade taxes, is potentially disruptive. A central bank is probably necessary for reserve currency status.

In 1971, US President Nixon imposed a trade tax on imports into the US, and froze US wages and prices. This was not a success. Faced with rising costs and no ability to adjust pricing, businesses stopped supplying goods. Controls collapsed, and inflation soared. Overnight media reports suggest US President Trump has told US auto companies not to raise prices in the wake of aggressive taxes on imported autos and parts.

US President Trump announced an aggressive tax increase for US consumers, with a 25% tariff on imported cars. Officials later clarified it also covers car parts. The tax will raise US inflation and lower growth, but the full impact will take time.

UK February consumer price data was slightly below expectations—before the weirdness of the UK government's capped energy pricing adds to inflation in April. Producer price data was not published, owing to quality issues. Labor market data is not being published, owing to quality issues. There will be revisions to wage data, owing to quality issues.

Reports that the US vice president and cabinet members discussed war plans on a public chat channel with a journalist in attendance do not directly impact markets. However, the chat messages reveal administration officials' attitudes (e.g. toward Europe), and raise general questions about the conduct of policy. Any lessening of international security cooperation may impact broader (economic) policy cooperation.

Media reports suggest that the rather haphazard attempts to restructure the US government could cost half a trillion dollars in lost tax revenues this year. Investors have not priced the restructuring as an efficiency improvement (more efficient government would boost both bonds and equities). While record wealth levels in the US suggest that the high fiscal deficit can be funded, losing tax revenue on this scale will raise concerns about sustainability at some point.

South Korean export data for early March recovered from lunar new year distortions. Export strength was led by ships and chips—more-consumer-oriented sectors were not so robust. The data is a positive signal for Korea, but does not perhaps say much about global demand as trade taxes increase.

The Federal Reserve left rates unchanged, as expected. Forecasts cut economic growth projections for the next three years, to a rate well below that of the each of the last four years. Inflation forecasts were pushed up. The media will rush to declare “stagflation”—but this is hardly the 1970s. Tariffs will raise inflation and then lower growth, so the pattern is not unexpected, and of course there is considerable uncertainty given erratic government policy.

Yesterday, US President Trump sought to fire the two Democrat commissioners on the Federal Trade Commission. If successful, this might become a precedent that could challenge the political independence of the Federal Reserve.

The OECD revised down estimates of US growth for this year and next. The OECD does not have any special insight (other than the extraordinary insight of all economists), and market forecasts for growth tend to adjust faster than those of the OECD. The announcement is a reminder of the shift in the narrative about US growth, in the face of erratic policy and rising US consumer taxes.

China's long-awaited plan to boost domestic consumption is here (as yet without much detail). Unlike the 2024 stimulus, these proposals seem to directly address consumers' fear of the future. However, the international spillover may be limited. Economic nationalism means that China's consumers have been less inclined to buy foreign goods.

The recurring risk of a US government shutdown has receded, with some Democrat senators looking to advance legislation. Against the backdrop of damage to “animal spirits” from erratic government policy and taxes, the potential for economic damage from a shutdown would be larger and longer lasting.

ECB President Lagarde almost sounded like an economist yesterday, noting inflation pressures could go up or they could go down. While highlighting the increased economic uncertainty of 2025, Lagarde confirmed market expectations that the direction of ECB rates is down. There are seven ECB speakers jostling for media attention today.

US President Trump imposed and retreated from aggressive taxes on US users of Canadian steel and aluminum, and Canada retreated from a surcharge on exports of electricity to the US. Canadian steel and aluminum are caught by yesterday's global 25% tax on US consumers. The EU responded with taxes on its consumers (buyers of bourbon are badly hit), but the EU consumers have substitutes as taxes are only against US products.

We discuss the work of Canadian Writer/Director Paul Donovan, and his ecclectic career of films that include SIEGE, LEXX, PAINT CANS and THE SQUASMISH FIVE. Send us stuff c/o Justin Decloux, Unit 1010, 3230 Yonge St, Toronto, ON, M4N 3P6, Canada Join the Patreon now for an exclusive episode every week, access to our entire Patreon Episode back catalogue, your name read out on the next episode, and the friendly Discord chat: patreon.com/theimportantcinemaclub Subscribe, Review and Rate Us on Apple Podcasts: podcasts.apple.com/us/podcast/the-…ub/id1067435576 Follow the Podcast: twitter.com/ImprtCinemaClub Follow Will: twitter.com/WillSloanESQ Follow Justin: twitter.com/DeclouxJ Check out Justin's other podcasts, THE BAY STREET VIDEO PODCAST (@thebaystreetvideopodcast), THE VERY FINE COMIC BOOK PODCAST (www.theveryfinecomicbookpodcast.com) and NO SUCH THING AS A BAD MOVIE (@nosuchthingasabadmovie), as Will's MICHAEL AND US (@michael-and-us).

Equity markets are not just about economics (equity analysts do not always listen to economists). However, shifting perceptions of economic risk seem to be behind recent US equity market moves. 2025 started with solid economic foundations in the US and other developed economies.

China's consumer prices moved into deflation in February. Some of this is due to the timing of the lunar new year, and some of it is the impact of warmer weather on food prices (food has a higher weighting in China's inflation calculation than in developed economies). However, markets are concerned that the low inflation environment does not suggest robust domestic demand.