Daily Commentary

MarketMinder’s View: As this article details, “August marks the fifth month in a row that China-to-U.S. shipments have increased due [to] both easier comparisons to last year, along with a more reasonable tariff environment for buyers and suppliers when compared to 2025.” As noted, a lot of that is tied to a low comparison base from a year ago, which skews the figure. Set this figure aside. Beyond that, China’s non-US trade is also booming. “Exports out of China are seeing broad-based strength across Asian markets, with the 10-country Association of Southeast Asian Nations (ASEAN), South Korea and Hong Kong seeing strong growth. ... Across the ASEAN contingency and Hong Kong, all of which serve as transshipment and re-export hubs, a chunk of the growth could reflect goods ultimately destined elsewhere.” With the US importing record amounts from ASEAN markets—and Mexico—it stands to reason Chinese wares are entering America via myriad methods (per FactSet, as Mexico’s imports from Asia also hit record levels). All this underscores how fears of tariffs and global trade’s demise remain greatly exaggerated.

MarketMinder’s View: In the wake of President Donald Trump’s “Liberation Day” last year, an unintended consequence was the strengthening of economic ties among non-US nations—and this article details one of those relationships. Canadian Prime Minister Mark Carney seeks to deepen his country’s alliance with Europe “to cover all areas of the relationship, including trade, security, supply chains and critical raw materials, with the goal of getting as close as legally possible to EU membership without actually joining.” Canada’s escalating spat with America may seem distressing, but it is 1) small potatoes and 2) not the only game in town. As this shows, there are other fish in the sea. Intriguingly, on this front, “The two sides have also discussed working together through the Trans-Pacific Partnership [TPP], a multi-country trade agreement of which Canada is a member.” While the EU isn’t a member of the (CP)TPP, the UK is, and the EU has launched talks to cooperate and coordinate with the CPTPP, both of which could be precedent for the EU joining. Now, nothing here is likely to move rapidly—there will likely be more talks, discussions and summits to come—but trade reality outside America is sunnier than surmised—one reason why non-US stocks, including Canadian, continue to lead year to date (per FactSet).

MarketMinder’s View: Look, we have no interest in wading into the political debate on indexing capital gains to inflation for tax purposes. But this piece argues indexation would “create wild distortions” in markets, which we find quite odd. The case for indexing gains to inflation is simple: Given inflation erodes nominal gains over time, it makes little sense for the government to tax returns inflation has already wiped out. In periods of hot inflation and/or weak returns, something this article doesn’t actually address, you could end up paying taxes on a real (inflation-adjusted) loss. That benefits no one but Uncle Sam. This piece dismisses all of this, arguing instead that indexing stock gains would distort bond returns. “For example, how much more yield would people then demand for owning bonds when appreciating assets like stocks are shielded? And what would governments and companies then have to pay to borrow? Long-term interest rates are already near multidecade highs worldwide.” That seems like a straw man to us, given US Treasury bond interest is already subject to federal ordinary income taxes while stocks are already taxed at a preferred rate. Heck, there is an inverse distortion at the state level, with states tacking their own capital gains rates on stock returns but letting US Treasury bond interest go tax-free. The claim is also easy to test against history, as we can see how yields responded to capital gains tax changes. We dug in and found no relationship. Yields continued falling after 1997’s capital gains tax rate cut. They chopped sideways after 2003’s. They fell after 2012’s. As for the other claim, that indexation will make 401(k)s and IRAs pointless because withdrawals are taxed at ordinary income rates, there is already a discrepancy! Ordinary income rates already exceed capital gains rates. But people still find it worthwhile to use these vehicles to defer income from their prime working years, when their top marginal rate is higher, to retirement, when it will probably be lower. Again, we aren’t trying to get political, but the unintended consequences posed in this article don’t hold up to us as likely threats.