The appeal

President Trump’s has embarked in another legal battle, this one related to his unprecedented use of the International Emergency Economic Powers Act (IEEPA) to impose broad duties on imports from nearly all U.S. trading partners. The Federal Circuit Court of Appeals, concluded last week that Trump’s executive orders exceeded IEEPA’s delegated authority, particularly for “reciprocal” tariffs aimed at trade imbalances and “trafficking” tariffs tied to fentanyl. Trump is now taking this matter to the Supreme Court, where there is a conservative majority, and the last 3 judges were appointed by him during his prior administration. If he wins the appeal, tariffs will continue as they are; if he loses, he could pivot to other legal tools for tariffs, such as: (1) Section 232 of the Trade Expansion Act of 1962: For national security threats, (2) Section 301 of the Trade Act of 1974: For unfair trade practices, or (3) Section 122: For balance-of-payments issues. But these three solutions will require him to follow certain procedures that may delay the implementation or modification of tariffs and will delayed the whole process. We cannot discard the scenario where the SCOTUS reaffirms the conclusion of the Federal Court of appeals which could potentially mean that the U.S. will need to return all money collected from tariffs, which as you can see in the chart below, is substantial. Under that scenario, we could see lower inflation, although it’s difficult to see that Trump will abandon the idea of tariffs all along. Noise and volatility ahead.

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