The Powers And Limits Of Taxation And Trade

Do you believe tariffs imposed by President Trump during his second term in office have been a net positive or negative for the U.S. economy?

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Welcome back from the weekend! Here is the latest in trending:

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Oil glut: OPEC+ will make one final production increase in December before pausing additional hikes. China’s oil stockpiling is also cushioning the market as U.S. sanctions hit Russian crude.

The Supreme Court this week will hear oral arguments in what might be the most important economic case to come before its nine justices. Under consideration is whether President Trump exceeded his authority in imposing tariffs on goods from more than 100 nations without approval from Congress. Countries will be watching. Companies will be watching. And, of course, investors will be watching as well. (2 comments)

Bigger picture: The Trump administration invoked trade tariffs under the International Economic Emergency Powers Act (IEEPA), maintaining that “growing deficits” and “the hollowing out of our manufacturing base” had reached a breaking point. Following the “Liberation Day” announcement in April, several small businesses that were hit with high import costs, along with twelve Democratic-led states, sued the administration, with lower courts ruling in their favor. An appeals process ensued, with the lawsuits consolidated and sent to SCOTUS, and an expedited ruling is now expected in a matter of weeks.

“If a President is not allowed to use Tariffs, we will be at a major disadvantage against all other Countries throughout the World, especially the “Majors.” In a true sense, we would be defenseless!” Trump wrote on Truth Social. “Tariffs have brought us Great Wealth and National Security in the nine months that I have had the Honor to serve as President. The Stock Market has hit All Time Highs many times during my short time in Office, with virtually No Inflation, and National Security that is second to none. Our recent successful negotiation with China, and many others, put us in a strong position only because we had Tariffs with which to negotiate fair and sustainable Deals.”

“The irreparable harms already suffered by American businesses large and small underscore the vast economic consequences of the president’s tariffs,” countered the U.S. Chamber of Commerce. “And it is precisely those consequences that cry out for serious legislative debate and clear statutory language before they may be unleashed.”

What happens next? If the high court rules against Trump, much of the over $100B in extra tariff revenue would likely have to be refunded, though questions remain on how that would be accomplished. It would also call into question the many trade deals and U.S. investments inked by the Trump administration, which were built on the reality of tariffs and certain rates. The court could also uphold the tariffs by ruling that IEEPA is broad enough or issue a narrower ruling based on statutory or procedural grounds, leaving the door open for different tariffs under other trade laws (Treasury Secretary Scott Bessent has already prepared a “Plan B”).

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Today’s Markets

In Asia, Japan closed. Hong Kong +1%. China +0.6%. India flat.
In Europe, at midday, London +0.1%. Paris +0.3%. Frankfurt +1.1%.
Futures at 6:30, Dow +0.1%. S&P +0.4%. Nasdaq +0.7%. Crude -0.5% to $60.69. Gold +0.4% to $4,012.90. Bitcoin -2.8% to $107,676.
Ten-year Treasury Yield +1 bp to 4.09%.

On The Calendar

Companies reporting today include Palantir Technologies (PLTR) and Realty Income (O).

See the full earnings calendar on Seeking Alpha, as well as today’s economic calendar.