UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Tying tariffs to inflation perceptions'
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Nov 14, 2025 The discussion highlights the US administration's push to cut tariffs, particularly on food products, in response to consumer inflation concerns. Paul Donovan warns that public reductions might perpetuate misconceptions linking tariffs to consumer prices. He also delves into the limitations of bilateral deals with Latin America due to Mercosur rules. Additionally, China's recent industrial data reveals struggles in production and investment, impacting consumer spending. The conversation wraps up with insights about the European Central Bank's Chief Economist and upcoming trade data.
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Tariff Cuts Driven By Inflation Perceptions
- Political concern about consumers' inflation perceptions is driving tariff-cut negotiations focused on food.
- Paul Donovan argues this focus risks reinforcing mistaken beliefs about how tariffs affect retail prices.
Anticipate Narrow, Constrained Trade Deals
- Expect trade talks with Latin American countries to be narrowly framed around food imports due to political pressure.
- Be aware Mercosur rules will constrain bilateral deals and limit what individual countries can offer.
Tariff Impact On Consumer Prices Is Smaller
- Tariffs are paid early in the supply chain so a 10% tariff typically raises consumer prices by around 4%.
- Donovan warns that public misunderstanding could let retailers use price setting to create profit-led inflation.