The US Supreme Court has declared President Donald Trump’s sweeping global tariffs unlawful, a decisive setback for a key element of Trump’s economic policy and his most significant legal defeat since his return to the White House. The Court found that Trump had overstepped his authority by using emergency legislation to impose “reciprocal” tariffs worldwide.
The judges did not comment on whether refunds of the collected import tariffs must be issued. This question will now be addressed by lower courts.
Market reaction
In an initial response, equity markets and US Treasury yields edged higher, while the US dollar showed weakness. The removal of tariffs fuels hope that a burden on corporate profits could be lifted, potentially brightening economic prospects. However, since the decision was widely anticipated, including signals from the US administration, the long-term impact remains uncertain.
The White House has announced plans to reintroduce tariffs through other mechanisms, which will likely create new short- and medium-term uncertainties in global trade. The situation had previously relaxed following the latest tariff agreements.
On a positive note, the ruling may help curb the president’s impulsive tariff announcements on social media, even though such announcements recently had little lasting effect.
What does this mean for investors?
The initial market reactions are likely to be short-lived. We recommend staying calm and avoiding any hasty reactions. While this decision may create new short- to medium-term uncertainties in global trade, investors should not make any strategic adjustments based solely on this development. Strategy and discipline remain more important than reactionary measures.
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