Welcome to Thoughts on the Market. I'm Michael Zizis, head of Public Policy Research and Municipal Strategy for Morgan Stanley.

Along with my colleagues bringing you a variety of perspectives, I'll be talking about the intersection between U.S. public policy and

financial markets.

It's Monday, January 27th at 9 a.m. Eastern.

We turn back to trade policy this week, where there's been a mix of positive and negative news around the US and EU negotiations.

Cutting through the noise, our take remains that there's still plenty of risk of tariff increases this year.

First, we'll start with the good news.

France agreed to withhold collections on its new digital

tax, which would largely impact US companies, while the US and Europe attempted to negotiate

a broader arrangement through the Organization for Economic Cooperation and development, the OECD.

But the story didn't end there. The UK, Italy, Austria, and Turkey remain among countries

considering an imposition

last week in Davos would be grounds for a response with auto tariffs.

The EU is also considering a carbon tax,

which again was met with a warning from US officials that tariffs could be one way the US responds.

The bottom line is that much remains unsettled in the US-EU trade relationship, and now the issue

of taxation has further complicated negotiations.

So while the US and China appear to be taking a short breather from their tensions,

we'd remain on guard for the situation with the EU to become more tense.

It's another reason that our strategists think that despite trade progress with China, U.S. equities are

unlikely to repeat their strong performance from last year.

Thanks for listening.

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