UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'More changes to policy'
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Oct 17, 2025 The podcast dives into the US administration's decision to extend the delay on car parts tariffs from two to five years due to heavy lobbying from auto producers. It discusses how this tariff change impacts inflation and adds to policy uncertainty. Paul Donovan highlights concerns over credit markets but reassures that US household balance sheets remain strong. He also touches on the Federal Reserve's lean towards interest rate cuts, euro area inflation trends, and a bold German proposal for a single European equity market in a complex economic landscape.
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Tariff Pause Eases Auto Pressure
- The US may extend a partial exemption on tariffs for imported car parts from two to five years after intense domestic lobbying.
- Paul Donovan says this eases pressure on US automakers but highlights US policy uncertainty.
Tariff Retreat Raises Economic Uncertainty
- Reducing the tariff base forces economists to keep revising inflation and economic-damage estimates.
- Donovan warns policy uncertainty itself can harm the economy even if its effect fades over time.
Household Strength Limits Credit Risk
- Markets worry about credit but access hasn't constrained activity, especially in the US.
- Donovan notes strong household balance sheets have limited the downturn so far.