After stock markets closed last Friday, August 29, the Appeals court ruled that Trump’s reciprocal tariffs are illegal.
The decision weakens the White House’s bold attempt to impose punitive tariffs on countries that have not yet signed a deal. In late July, Japan, the European Union, and Asia are some of the countries that had already agreed to the tariffs.
Before the court’s ruling, tariffs would have affected nearly 70% of goods imported by the U.S. Now, they have an impact on around 16%. The “good news” is far from firm. The Trump administration may appeal the decision. The Supreme Court would review the decision.
Even if the government seeks alternate ways to apply duties, Mexico (EWW) and Canada (EWC) are in a better position. Global investors already bet that their prospects would improve in 2025. Shares of EWW and EWC ETFs are up by 32% and 20.9%, respectively.
The court ruling adds more volatility to stock markets. Suppliers face even more chaos.
They need to consider pausing exports, waiting for courts to strike down the tariffs.
Alternatively, the Administration might win the case or find other means to impose duties on its trade partners.
Investors should watch out for the 20+ Year Treasury (TLT) weakening. However, the U.S. dollar index (DXY) might bounce back. Demand for the currency rises when imports strengthen.
