UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'The taxation burden descends'
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Aug 1, 2025 Rising taxation is casting a shadow over US consumers. The newly implemented minimum sales taxes are set to hit hard, affecting spending power and potentially altering the labor market. There's speculation on whether courts will intervene, which could reshape the tax landscape. If these taxes stick, the repercussions might ripple through inflation and global business sentiment. The future looks uncertain as consumers brace for the unseen costs of these financial changes.
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Historic US Consumer Tax Burden
- US consumers face the highest trade taxes since 1935 due to new minimum sales tax and tariffs.
- This represents the largest tax increase on US consumers in three generations.
Trade Tax Timing and Legal Risks
- Most new US trade taxes won't be paid by consumers until January next year due to a delay and stockpiling.
- Courts may overturn some taxes, possibly preventing consumers from feeling full costs.
US Consumer Spending Amid Taxes
- April trade taxes already influence US consumer price inflation and spending remains steady.
- US consumers' real wage growth turns negative but they rely on savings and credit to soften the impact.