UBS On-Air: Paul Donovan Daily Audio 'Tariffs start to show up'
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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 Friday the 21st of March. South Korean export data for the first 20 days of March showed a recovery from the February figures, which was of course distorted by the movable Lunar New Year holiday. Key drivers in March were ships and chips.

Ships are, of course, a rather lumpy category, and ships are somewhat independent of the anxiety over economic nationalism and rising trade taxes. Exports to the United States did grow, but relatively slowly. Exports to China, which has a role as a late-stage link in global supply chains, were also slower.

The numbers are relatively positive, seen from a Korean perspective alone, but the composition is not perhaps sending quite such positive signals about the general state of global trade. In the United States, we're starting to get media reports of job losses that are being directly attributed to US President Trump's trade taxes.

steel workers in Minnesota being the latest high profile case as tariffs threaten the auto sector's demand for steel. In the politically partisan environment of the United States, it is wise not to take everything at face value. Whatever the circumstances in the Minnesota case, tariffs can be a convenient excuse for job losses that would be driven by other reasons.

Nonetheless, if the narrative takes hold that jobs are at risk, the economic consequences are significant. It is the low fear of unemployment over the past four years that allowed US consumers the security to spend rather than save.

If uncertainty breeds more fear of unemployment, then the risk is that consumer spending slows in favour of saving as an insurance against an unpredictable future. The level of fear of unemployment is the difference between the expected slowdown of the US economy and the risk case of a much more severe contraction in the US economy.

Japan's February inflation figures slowed on the headline rate, but higher food and fuel prices did mean that inflation was slightly more than had been expected. The international standard measure of core inflation was stable at 1.5% on the year. Private sector service prices, which are assumed to be more sensitive to labour market costs, have been slowing somewhat. Government service sector inflation has been rising,

This is not terribly different to what we've been seeing in other advanced economies. The market forces of supply and demand are producing relatively benign inflation, and it is controlled, manipulated and invented prices that are the key forces pushing inflation higher. Yesterday's Bank of England meeting was accompanied by some statements of the obvious from Bank of England Governor Bailey, who noted that there was a lot of uncertainty at the moment.

For the benefit of international listeners, that should be taken as polite British understatement. The economic equivalent of saying it would be unfortunate if you ignored the national tea time alarm. The direction of rates is still likely to be down at a steady pace of a quarter point a quarter. Meanwhile, His Majesty's Office for National Statistics has announced that it will stop publishing producer price data for a while because there seems to be a problem with the methods used.

This will probably affect import and export price data too, of some relevance in the current climate. And this is all in addition to problems with labour market data. Overall, it's your regular reminder that when economists' forecasts disagree with the reported data, there is now a good chance that it's the data that is wrong, and not the economists'. That's all for today. Have a good day.

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