Supreme Court Strikes Down IEEPA Tariffs

This, to be clear, accounts for roughly half of the rise in the overall average effective tariff rate seen since President Trump returned to office, and chiefly concerns those levies that were imposed on a ‘reciprocal’ basis, as well as those levied on China, Canada, and Mexico regarding ‘fentanyl supply’.

Though the IEEPA tariffs have been struck down, there are at least five other sections of US commerce law which the Admin can lean upon in order to re-implement similar measures. While these measures, by and large, require either Congressional approval, an investigation by the Commerce Department, or are in some way time-limited, there are likely enough alternative methods that the Admin can employ to ensure that the overall average tariff rate remains little changed, at around 16%, once the dust settles. We, of course, await clarity from the Admin as to their exact plans on this front.

As for the issue of refunds, there is not yet clarity on this front either, however the ruling does – at face value – seem to indicate that these are now a distinct possibility.

While we await further information here, it is worth bearing in mind that any refunds are likely to be paid back over some time, and in large part will be funded by an increase in issuance of short-term Treasury bills, the impact of which would likely then be netted-off against any revenue from the aforementioned alternative tariff measures that may be on their way.

Overall, while today’s ruling does potentially, to some degree, nullify the ‘escalate to de-escalate’ negotiating strategy with which we’ve become familiar, it seems highly unlikely that the Admin, or Trump himself, will change their entire ‘modus operandi’ when it comes to negotiations, and using tariff threats as a means of leverage, in order to extract concessions from the other party. Put simply, for markets, and in the grand scheme of proceedings, little is likely to change on the trade front – while the legal ‘means’ of imposing tariffs will now differ, the ‘ends’ will ultimately be very similar to the current status quo.