UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Randomness and the real world'
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Jul 14, 2025 The discussion dives into how trade tax threats impact investors, revealing a stark difference between financial decision-making and real-world consequences. As firms grapple with hiring and construction decisions, the unpredictability of policy becomes a real risk. Also explored are tariff effects on consumer prices and the hurdles businesses face while passing costs on. Plus, a look at the shifts in China's trade patterns and the potential challenges appearing at the upcoming G20 meeting adds further complexity to global trade relations.
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Markets Expect Trump's Retreat
- Financial markets expect President Trump to back down from trade tax threats as a default behavior.
- Legal doubts about the trade taxes further support ignoring those headline threats in investment decisions.
Real vs Financial Investor Risks
- Financial investors can quickly reverse positions unlike real-world investors facing costly, irreversible decisions.
- Erratic trade policy randomness heightens risks for real economy investments in hiring or building factories.
Tariffs' Delayed Consumer Impact
- June US consumer price inflation will start reflecting trade taxes but the full impact takes months.
- Tariffs' cost burden falls on US companies and consumers, as exporters avoid adjusting prices.