Markets ended the holiday shortened week higher, as investors focused on corporate earnings, a busy economic calendar, and the Supreme Court’s tariff ruling.
On Friday, the Supreme Court issued a 6-3 decision, ruling President Trump’s tariffs enacted under the International Emergency Economic Powers Act (IEEPA) are illegal. The court did not opine on what that means for the nearly $130B collected to date under the IEEPA, representing ~50% of all tariffs collected since last April. For now, the Supreme Court left those decisions to lower courts, which will invariably hear numerous lawsuits from businesses seeking reimbursement.
Trump initially responded to the ruling by saying he will utilize Section 122 of the 1974 Trade Act to enact a 10% baseline tariff on all goods entering the country, before increasing it to the statutory limit of 15%. Section 122 tariffs are limited to 150 days and thereafter can only be extended by Congress. Trump suggested that during those 150 days his administration will conduct investigations into various trading partners to then allow tariffs under Sections 232 and 301 which can remain in place indefinitely. Such steps will likely face legal challenges. Already, the ruling and Trump’s threats of new tariffs is sowing confusion for the US’s trading partners. Over the weekend, the EU said it expects the US to abide by the terms of the EU-US trade deal signed last summer saying, “a deal is a deal.” The largest beneficiaries of the ruling are those countries, including China, Brazil, and India which had previously been subject to higher tariff rates, in some cases, as high as 50%.
