Tags: trump | tariffs | investors | eu | tax | increases

Trump Slaps Even More Taxes on Bruised US Consumers

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By    |   Tuesday, 09 April 2019 10:10 AM

Just when many thought it was safe to go back onto the global trade battle field, President Donald Trump has demanded another round of tariffs, or tax increases, be imposed on U.S. consumers by establishing new tariffs on goods that will be imported from the European Union (EU).

The Office of the United States Trade Representative (USTR) has published in a statement a preliminary list of European Union products to be covered by potential duties in response to European Union subsidies to Airbus that the World Trade Organization has found cause “adverse effects” to the United States.

The list of EU products ranges from large commercial aircraft and parts to dairy products and wine.

The USTR estimates the harm from the EU subsidies at about $11 billion in trade each year.

And yes, for everybody, this time is a little bit different from what we have recently experienced with new U.S. tariffs on imported goods.

Investors could do well to keep a close eye on this developing situation.

In 2018, the WTO ruled that the European Union had failed to remove illegal subsidies for two Airbus airplane programs, the A350 and the A380.

Trump has, rather unusually, decided to agree with the World Trade Organization (WTO) and is intending to impose tariffs or taxes on U.S. consumers of selected European goods by way of retaliation.

Whether Trump would be quite so willing to accept the verdict of the World Trade Organization about unfair assistance from the United States to Boeing, which is an ongoing case, is a rather different matter.

Anyway, Reuters reported that the European Union has begun preparations to retaliate over Boeing subsidies.

The interesting news is that this is taking place within the international law of the World Trade Organization and anything that accepts and strengthens international trade structures, in the current climate, is a good thing.

It is also a fact that Trump’s intended tariffs, or tax increases, will generally hurt the U.S. consumers directly, in contrast to the previous tariffs or taxes that did more damage to the U.S. corporate sector. It is also a fact that these new tariffs aren't tariffs that are likely to hurt companies’ supply chains particularly.

The bad news is that these tariffs or tax increases come ahead of discussions with the European Union (EU) on autos and new U.S. tariffs in the recent past have done a lot of damage to corporate investment and to equity stock markets.

Raising the ghost of more U.S. tariffs or tax hikes at the time when markets were trying to forget the uncertainties surrounding trade may worry investors as these new tariffs might eventually cause an escalation of the trade tensions between the United States and the European Union.

Moody’s stated today that potential U.S. tariffs on imported autos and parts represent a significant risk to global growth. Auto tariffs would hinder economic momentum in Germany, Japan and Korea but would be less severe for China.

In the meantime, the dollar index (DXY) is slightly down to 96.9130 from yesterday’s close at 97.05 while its still bullish trend continuous, for the moment at least, as it continues trading above the key 200-day simple moving average (SMA).

The euro remains practically unchanged from yesterday’s close at USD $1.1278.

For the moment global stocks remain mostly positive oriented.

Besides all that, over in Europe we got from Italy the revised GDP growth numbers that show Italy's economy shrank 0.1 percent on quarter in the last three months of 2018, which was the same as in the previous quarter and slightly above the 0.2 percent contraction previously estimated. Still, it was the second straight quarter of GDP decline, which classifies “technically” Italy into recession, and for the third time in a decade.

In the interminably tedious EU-UK divorce process, little of interest has happened because this is the interminably tedious EU-UK divorce and nothing of interest is ever likely to happen, according to the BBC.

  • Parliament has passed a law that aims to prevent a no-deal exit.
  • The UK is also to participate in the European Parliamentary Elections that will be held on May 23-26.
  • Prime Minister Theresa May is off to Berlin and Paris to make her case for an extension, while talks with the opposition Labor Party continue at home in the UK.

Investors show little inclination to react to every twist and turn of the Brexit process.

The British pound is at $1.3074 and is practically unchanged from yesterday’s close.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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It is also a fact that Trump’s intended tariffs, or tax increases, will generally hurt the U.S. consumers directly, in contrast to the previous tariffs or taxes that did more damage to the U.S. corporate sector.
trump, tariffs, investors, eu, tax, increases
Tuesday, 09 April 2019 10:10 AM
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