UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio '50% on'
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Aug 27, 2025 US import taxes on Indian goods have surged to 50%, but the impact on consumer inflation is expected to be minimal. This shift highlights how unpredictable US trade policies are forcing global companies to rethink their supply chains, especially with India emerging as a manufacturing alternative to China. The podcast also delves into current global trade trends and the often unreliable sentiment indicators in Germany and the UK, revealing how perceptions may not always align with economic realities.
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50% Tariff Shift Has Limited Direct Inflation
- The US raised import taxes on goods from India to 50%, but shipments already en route remain taxed at 25%.
- Given India's 2.7% share of US imports and imports ~10% of GDP, the direct inflation effect is under 0.1 percentage point with full pass-through.
Tariff Move Increases Supply-Chain Uncertainty
- The tariff change raises uncertainty for multinationals considering India as an alternative to China for labour-intensive production.
- This unpredictability in US trade policy may force corporations to alter supply chains and poses a broader economic challenge.
Political Risk Could Steepen The Yield Curve
- Investors worry that political moves against Fed officials could politicise monetary policy and have steepened the US yield curve.
- Markets currently do not price in overt politicisation, and there are few Fed speakers this week.