Over the past week, the Supreme Court of the United States ruled that elements of the White House’s tariff program were implemented illegally, significantly limiting the administration’s ability to impose broad tariffs without approval from Congress. The decision places future use of tariffs at risk and reduces the government’s flexibility to use trade measures as a negotiating tool in geopolitical and trade disputes.
From a market perspective, this may ease the risk of escalating retaliatory trade actions, which have previously contributed to supply disruptions, particularly in commodities and strategic resources. The White House has now re-introduced tariffs under alternative legislation, although the available methods appear more complex and likely cap implementation periods (at 150 days before Congressional approval) than previously in place.
While companies may seek refunds for tariffs already paid, consumers who absorbed higher prices over the past nine months are unlikely to see any compensation. These risks adding to ongoing cost of living pressures ahead of the US mid-term elections, potentially increasing the likelihood of a change in congressional control if economic conditions do not improve through fiscal support measures.
With cost of living front-and-centre of the electorate’s concerns, it is possible we may see stimulus payments direct to the end consumers floated, rather than a return of tariffs collected to the companies, as a method to shore up congressional votes and ensure that the remainder of the White House term does not become a ‘lame duck’ situation.
While there are no direct portfolio implications for now, Daintree notes that this is a very fluid and developing situation and will continue to monitor closely.
