UBS On-Air: Paul Donovan Daily Audio 'Tariffs may not “solve” everything'
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Good morning. This is Paul Donovan, Chief Economist at UBS Global Wealth Management. It's seven o'clock in the morning London time on Thursday the 23rd of January. Japan's December trade data showed weaker imports and stronger exports than had been anticipated. Exports to the United States actually fell, which raises questions about the degree of stockpiling ahead of potential trade taxes in the United States.

More stockpiling in the States now would reduce the disruption that US import taxes would generate and might allow short-term trade tariffs to pass without too much impact on the US economy. If stockpiling has not been happening, then the effects of trade taxes are likely to be felt more immediately by US consumers. The United Kingdom has survey evidence from the corporate sector with the CBI's Trends Survey

It's questionable as to whether this survey would pass the Rice-Davis test. Pessimism may well be a case of "they would say that, wouldn't they?" Being gloomy in surveys is a way of expressing opposition to recent moderate tax increases imposed on corporates.

It's possible that the more severe winter flu has affected economic activity in January as well, although non-food retail sales were exceptionally strong in the UK in December. And that might argue against any threats to the UK consumer when it comes to spending money.

US initial jobless claims data are due. This data is likely to start to show the effects of the fires in California, which makes reading the headline number increasingly difficult as time goes on. The demographic of the affected area does mean that at least a reasonable proportion of the population will be able to work remotely.

But of course, people in the service industry who worked for residents of L.A. County are particularly vulnerable to job losses. U.S. President Trump has threatened to charge U.S. consumers of Russian goods further taxes if Russian President Putin does not begin negotiation to end Russia's war against Ukraine.

markets' hopes for a ceasefire may now have to be revised, as it seems a somewhat less forceful position than Trump's earlier vow to end the war by last Monday. There are relatively few US consumers of Russian goods, and at this stage of the war, it seems fairly unlikely that they would be deterred from consuming by a US tax increase.

Additional sanctions against Russia might prove to be more effective, but it's also worth noting that the effectiveness of sanctions does have a tendency to decay over time. That's all for today. Have a good day.

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