UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'When does reality bite?'
Apr 28, 2025
Recent US consumer sentiment is notably up, particularly among registered Republicans, but the underlying economic realities remain uncertain. Consumers are still relying on older inventory before trade taxes take effect. There's a striking disconnect between sentiment and actual economic conditions, fueled by partisan media biases. Businesses are responding quickly to this uncertainty, leading to a significant drop in US port activity as they hesitate to make moves amidst fluctuating consumer behaviors.
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Partisan Consumer Sentiment
- US consumer sentiment improved notably in April, but only among registered Republicans.
- This suggests economic realities have not penetrated the partisan media bubbles affecting consumers.
Trade Taxes Delay Consumer Impact
- Consumers buy goods imported before the new trade taxes took effect, delaying economic impact by about three months.
- Businesses react faster, showing pessimism leading to lower port activity amid uncertainty from Trump's trade taxes.
Trade Taxes and Tax Cuts Reality
- President Trump suggested using trade tax revenue to fund income tax cuts for those earning under $200,000.
- This reveals recognition that trade taxes hurt US households, especially lower-income ones, but the math does not add up.