Tariffs quagmire dominates the setting to start out the week

So, the US Court of Appeals for the Federal Circuit decided in a 7-4 ruling over the weekend that Trump’s reciprocal tariffs are illegal. The ruling stated that the use of the IEEPA was improper in pushing tariffs against the likes of Canada, Mexico, China, as well as the broader reciprocal tariffs. You can check out more details here.

All of this is throwing markets in a bit of a limbo now to start the week. So, what happens next from here?

As per his common tactic these days, Trump is going to fall back to lean on the US Supreme Court to try and overturn the ruling here. He has until 14 October to make that appeal and that’s where real consequences might fall into place.

A reminder for those unaware is that three of the nine members of the US Supreme Court were appointed by Trump back during his first term. And as a whole, six of the nine members had been appointed by Republican presidents.

Does that mean that there will be bias in the decision? Perhaps but not a guarantee though.

They have been fairly vocal about their position with how Trump is threatening Fed independence and they won’t really stand for that. And typically, they are also rather critical towards presidents when any policy overreach is one that is made through bypassing Congress. In any case, we’ll have to wait and see.

For now, Trump’s reciprocal tariffs will continue to be allowed to be in effect until the October deadline. But after which, they will no longer be enforceable pending the appeal with the US Supreme Court.

As another reminder, these tariffs in dispute do not involve those on steel and aluminum – which are separate and will remain in place regardless.

The question then is what will happen if Trump’s tariffs are reaffirmed to be illegal?

That’s a massive can of worms to open after all the duties collected by the US in the past few months, not to mention any ongoing trade deals and framework agreements.

Does the US have to pay back the billions of dollars it has obtained from imposing these tariffs in the last few months? What now of all the trade deals that are being negotiated in particular the ones with the China, EU, UK, Japan, and South Korea?

On the flip side, if the US Supreme Court does side with Trump, that’s going to be a separate concern for markets. It is basically a green light for Trump to keep reigning chaos and do whatever he wants without care for wanting to deal with Congress.

Fun times, eh?