Uddrag fra Zerohedge:
The US Supreme Court scheduled Friday as an opinion day, indicating that it will be the first chance for a ruling on President Donald Trump’s global tariffs.
The court never says in advance which decisions are ready for release, only that rulings in argued cases are possible when the justices take the bench at 10:00 a.m. Washington time.
A tariff decision is a possibility given the court’s expedited handling of the case so far.
Arguments on Nov. 5 suggested the court was skeptical that Trump had authority to impose the tariffs under a 1977 law that gives the president special powers during emergency situations.
Prediction markets suggest a mere 24% chance that Trump’s tariffs are upheld…
Treasury Secretary Scott Bessent predicted that the administration still will be able to implement its tariff agenda regardless of whether it prevails in a pending case before the Supreme Court. Repeating assertions he had made prior to the high court hearing a month ago, Bessent cited several sections of 1962 Trade Act that give the president sweeping powers over import duties.
“We can recreate the exact tariff structure with [sections] 301, with 232, with 122,” he said during an onstage interview at The New York Times DealBook Summit.
The majority of justices are skeptical – likely 7-2, or 6-3 ruling against – leaving the question of whether there is middle ground on the Court if certain tariffs are allowable under IEEPA. Goldman summarizes the scope of outcomes:
1) None allowed (worth 7.5% off of effective tariff rate).
2) Rule against reciprocal tariffs, but allow specific separate emergency tariffs (Canada, Mexico, China, Brazil, etc) would leave roughly 1% IEEPA related tariff effect.
3) Rules in favor of all IEEPA tariffs (unlikely)
There will be lead time between opinion and any implementations.
So, what happens if Trump’s tariff’s are rejected?
MishTalk.com’s Mike Shedlock counts seven options Trump is likely to try.
There are serious problems with all of them…
Trump’s Other Options
- Section 232(b) of the Trade Expansion Act of 1962. Section 232(b) provides for the imposition of tariffs or quotas on imports that threaten to impair U.S. national security. Investigations may be self-initiated by the Department of Commerce (Commerce). They may also be initiated based on an application from an interested party or at the request of the head of another U.S. government agency. If Commerce finds that imports of a particular product or products threaten to impair U.S. national security, the president decides whether to impose tariffs or quotas on such imports.
- Section 122 of the Trade Act of 1974. This statute authorizes the president to impose quotas and tariffs of as much as 15 percent for up to 150 days against one or more countries that have “large and serious” balance-of-payment surpluses with the United States.
- Section 201 of the Trade Act of 1974. Section 201 permits the president to impose tariffs or quotas on imports of a particular product where there has been a surge of imports of that product. To have tariffs or quotas imposed under Section 201, the import surge must constitute a substantial cause of serious injury to the U.S. industry producing the product in question.
- Section 301 of the Trade Act of 1974. Under Section 301, upon a finding that another country has denied the United States its rights under a trade agreement or has engaged in practices that are unjustifiable, unreasonable or discriminatory and burden or restrict U.S. commerce, the United States may impose tariffs and quotas against the foreign country’s imports. Section 301 investigations are conducted by the U.S. Trade Representative’s Office, which has the authority to impose duties and quotas and to suspend benefits granted to the United States’ trading partners under trade agreements.
- The Trading With the Enemy Act (TWEA) and the International Emergency Economic Powers Act of 1977 (IEEPA). TWEA and IEEPA authorize the president to regulate all forms of international commerce and freeze assets in time of war (TWEA) or in response to “unusual or extraordinary” international threats to the national security, foreign policy or economy of the United States (IEEPA).
- Anti-Dumping and Countervailing Duty Laws. Upon a finding that a U.S. industry is being “materially injured” or threatened with material injury by dumped or subsidized imports, the United States can impose anti-dumping (AD) or countervailing (CVD) duties to offset the level of dumping or subsidization that is occurring. Investigations may be initiated in response to a petition from a domestic industry or union, or may be self-initiated by Commerce. A number of industries have successfully brought investigations under these laws in recent years to address injury being caused by unfairly traded imports, and the brisk pace of cases and investigations is expected to continue as numerous industries continue to face overcapacity and other structural issues arising from subsidization and government intervention in markets.
- Enforcement of Existing AD/CVD Orders and U.S. Customs Laws. Companies importing into the United States also should expect increased enforcement of existing AD and CVD orders as well as other requirements of the U.S. customs laws. Among other areas, U.S. Customs and Border Protection can be expected to increase enforcement actions against imports suspected of evading AD and CVD duties under the recently enacted Enforce and Protect Act of 2015 and other grants of enforcement authority
The above seven points are from a 2017 article on US Trade Policy and Enforcement
Here are some issues based on reading additional links including the Trade Act of 1974
Trade Act of 1974 – Section 122
Section 122 only allows 15 percent and only for 150 days.
President shall proclaim, for a period not exceeding 150 days (unless such period is extended by Act of Congress)—
(A) a temporary import surcharge, not to exceed 15 percent ad valorem, in the form of duties (in addition to those already imposed, if any) on articles imported into the United States;
(B) temporary limitations through the use of quotas on the importation of articles into the United States; or
(C) both a temporary import surcharge described in subparagraph (A) and temporary limitations described in subparagraph (B).
Trade Act of 1974 – Section 201
SEC. 201. ACTION TO FACILITATE POSITIVE ADJUSTMENT TO IMPORT COMPETITION. (a) PRESIDENTIAL ACTION.—If the United States International Trade Commission (ITC) (hereinafter referred to in this chapter as the ‘‘Commission’’) determines under section 202(b) that an article is being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or the threat thereof, to the domestic industry producing an article like or directly competitive with the imported article, the President, in accordance with this chapter, shall take all appropriate and feasible action within his power which the President determines will facilitate efforts by the domestic industry to make a positive adjustment to import competition and provide greater economic and social benefits than costs.
Section 201 includes a 150-day review period. It requires the ITC to examine factors other than imports which may be a cause of serious injury, or threat of serious injury, to the domestic industry. It requires “clear evidence that increased imports (either actual or relative to domestic production) of the article are a substantial cause of serious injury, or the threat thereof, to the domestic industry producing an article like or directly competitive with the imported article …”
Amusingly only three of six positions of this bipartisan commission are currently filled, two of which are Democrats.
The USITC is headed by six Commissioners who are nominated by the President and confirmed by the U.S. Senate. No more than three Commissioners may be of any one political party. Currently two Democrats and one Republican serve as Commissioners.
Trade Act of 1974 – Section 301
This section has the same flaws as 201. The bipartisan commission needs to agree with Trump. And there are 150-day review periods.
Trading With the Enemy Act (TWEA)
The TWEA pertains to the ability to freeze assets in time of war, not impose tariffs.
And we are not at war in the first place.
Anti-Dumping Laws
AI Analysis: Anti-Dumping (AD) and Countervailing Duty (CVD) laws are trade remedies allowing countries (like the U.S.) to impose extra tariffs (duties) on imported goods that are “dumped” (sold below fair value) or unfairly subsidized by foreign governments, aiming to protect domestic industries from unfair competition and injury. The process involves investigations by the Commerce Department (determining dumping/subsidy) and the International Trade Commission (determining industry injury), resulting in duties equal to the dumping margin or subsidy amount to level the playing field.
No doubt the commerce department would rule in Trump’s favor.
However, the bipartisan ITC gets to set the penalty.
Trade Expansion Act of 1962 – Section 232(b)
In practice, much if not all of the above, may prove to be useless to Trump except the Trade Expansion Act of 1962. But that’s a potential slug as well.
Section 232 Process
Under Sec. 232, the head of any department or agency, or any “interested party” may request that the Secretary of Commerce investigate the effects of a specific import on U.S. national security. The Commerce Secretary may also self-initiate an investigation. The Commerce Secretary must immediately notify the Secretary of Defense regarding any Sec. 232 investigation. If a petitioner withdraws a request, Commerce may choose to terminate an investigation.
Investigation and Report. Sec. 232 investigations are conducted by the Commerce Department’s Bureau of Industry and Security. Commerce must “immediately initiate an appropriate investigation to determine the effects [of the subject imports] on the national security”. Commerce is to consult with the Secretary of Defense, other “appropriate officers of the United States,” and allow for public input if “appropriate and after reasonable notice.” Within 270 days of initiating a Sec. 232 investigation, the Commerce Secretary must submit to the President a report on the investigation’s findings with respect to the effect of an imported good “in such quantities or under such circumstances” upon U.S. national security and recommendations for action or inaction.
2017-2021. During the first Trump Administration, Commerce completed seven Sec. 232 investigations: (1) aluminum, (2) steel, (3) automobile and automobile parts, (4) uranium, (5) titanium sponge, (6) transformers and transformer components, and (7) vanadium. In all completed investigations except for vanadium, Commerce found a threat to U.S. national security.
President Trump imposed tariffs on steel and aluminum in 2018. He later modified the steel and aluminum tariffs, granting certain product and country exemptions as well as negotiating import quotas and increasing tariff rates on specific countries and goods. For other goods, the Trump Administration entered into negotiations with trading partners. For uranium, President Trump did not concur with Commerce’s finding of a national security threat, but announced the establishment of a working group.
2021-2025. The Biden Administration conducted a Sec. 232 investigation into neodymium-iron-boron (NdFeB) permanent magnets and found a threat to U.S. national security. President Biden concurred with Commerce’s determination related to permanent magnets and announced various actions to improve supply chain resiliency.
National Security Threat
The term “national security threat,” is not defined in Sec. 232. Some groups argue that the Trump Administration’s definition, particularly related to economic factors, is overly broad, resulting in overutilization of Sec. 232. The White House asserts that “economic security is national security.” Some groups argue that Congress should play a role in defining national security threats. Others support maintaining a flexible definition of national security, arguing that it allows the United States to respond quickly to evolving threats.
No doubt Trump will claim nearly everything to be a national security issue.
However, turning items like toys, movies, coffee, mangoes, rice, T-shirts, and underwear into national security issues will quickly look ridiculous.
If things get too extreme, which I fully expect, there will be more court challenges.
Thus, there’s quite a bit at stake in the upcoming Supreme Court decision on reciprocal tariffs.
How will markets react?
If the nation’s top court says Trump exceeded his power with the blanket tariffs on countries around the globe, there will still be significant longer-term uncertainty, given that the White House could seek to re-impose similar levies by invoking different legal authority.
But analysts and investors say the immediate market reaction appears somewhat more predictable.
As Bloomberg reports, a ruling striking down the tariffs would likely give a boost to stocks by promising to improve profit margins and remove a burden on consumers. At the same time, Treasuries may come under pressure as that potential stimulus complicates the outlook for the Fed’s rate-cut path and threatens to worsen the government’s budget deficit.
Overall, a ruling against the tariffs would boost the earnings of companies in the S&P 500, before interest and taxes, by 2.4% in 2026 over last year’s levels, Wells Fargo & Co. Chief Equity Strategist Ohsung Kwon previously estimated. That would likely drive investors to push up prices to reflect higher profits if the Supreme Court rules against Trump. James St. Aubin, chief investment officer at Ocean Park Asset Management, said that would be “a catalyst for a little bit of a rally.”
Some stocks stand to benefit more than others. The tariffs have been particularly painful for businesses that are heavily dependent on imported goods, such as companies that cater to the US consumer. Financial firms like banks are seen likely to benefit from a more confident or flush consumer as well.
“On the flip side,” said Haris Khurshid, chief investment officer at Karobaar Capital, “materials, commodities and domestic producers that benefited from protectionism might lag a bit.”
JPMorgan’s Delta-One Desk lays out a detailed scenario analysis for how stocks will react?
The balance of the probabilities are Market Intelligence estimates.
- TARIFF STRUCK DOWN AND IMMEDIATELY REPLACED – [66%] this is the base case per comments from both Trump and Bessent. This outcome seems like a Time Value of Money problem where cash flows in year 0 increase by the amount of the tariffs though that money will likely need to be recouped via lawsuit. Future realized effective tariff rates should remain similar to what was paid in 2025. Look for the SPX to rise on the announcement, 0.75% – 1% on the same-day, and then for investors to fade the move as the Administration replaces emergency tariffs. SPX closes up 10-20bps.
- TARIFFS UPHELD – [24%] this status quo outcome may see bigger moves in the yield curve than with Equities, given how much the yield curve appears to have adjusted to a SCOTUS that strikes down tariffs. Look for the SPX to decline 30bp – 50bp same day.
- TARIFFS STRUCK DOWN AND REPLACED AFTER MID-TERMS – [9%] the most bullish outcome as this assists the Fed’s tariff-induced inflation headwind, gives small businesses temporary relief but increases uncertainty unless there is a specific announcement on timing. Assuming the Administration is transparent on timing, look for the SPX to rise 1.25% – 1.5% on the day with RTY significantly outperforming.
- TARIFFS STRUCK DOWN AND NO REPLACEMENT – [1%] this would be the most bullish outcome for stocks but make see the recent yield curve steepening continue, more aggressively; so, there may be Rates Vol-induced limits on the Equity move. Speaking to our colleague Mark Whitworth, he highlights that some of our Rate clients think this outcome would push Trump to an incrementally more dovish Fed candidate (view is that the candidate is announced post-SCOTUS ruling). This would twist the yield curve steeper with the back-end selling off on higher inflation expectations. SPX rises 1.5% – 2% on the day, again with RTY outperforming.
Bloomberg also notes that bond traders are also bracing for volatility, even if it’s expected to be short-lived.
A removal of tariffs would likely “rekindle fiscal concerns, presenting a risk of higher long-term yields and steeper curves,” JPMorgan strategists including Jay Barry wrote in a note. But any such impact “should be fairly limited,” because the Trump administration is likely to pursue alternative legal routes to reinstate most of the levies, they added.
Investors would be watching for any word on the timing and scale of refunds that the government might have to pay to importers, according to Morgan Stanley. A team including Martin Tobias and Matthew Hornbach said that would have implications for the size of the government’s Treasury bill sales.
But given that Wall Street traders have been waiting for such a potential verdict – and have likely priced in some of the risk – a bond market selloff would likely prove short lived, according to the Morgan Stanley analysts: “The second order and more lasting reaction is investors ‘buy the fact’ and send yields lower,” they wrote.
“We have a big Supreme Court case,” Trump told House Republicans Tuesday.
“I hope they do what’s good for our country. I hope they do the right thing. The president has to be able to wheel and deal with tariffs.”