The US Court of International Trade may have ruled to block Trump's reciprocal tariffs but it doesn't mean it's the end of that. Trump will appeal the decision and surely fast track the motion in the courts to try and get the ruling overturned. And as you would expect in Trump fashion, he will be loud about it and reaffirm strong belief in winning the appeal.
As a reminder, the US Constitution gives Congress the power to impose tariffs but much of this power has since been delegated to the Executive Branch (led by the president) since the Trade Expansion Act of 1962. This means that the Executive Branch can call the shots on tariffs without the need for Congressional approval. And so, courts have allowed for the Executive Branch to retain this authority - at least until today when the latest ruling above is out.
However, Trump does still have other avenues to pursue if he really still wants to go forward with tariffs as seen here.
In turn, that marks a loss of income for the government in a time when the bond market is already signaling some degree of uneasiness when it comes to the US deficit. So, what becomes of Trump's plans for tax cuts now too? That's another point to consider in all of this.
What is disguised by tariffs is certainly further steps in the decoupling between the US and China. And in time, we will get heavier sectoral tariffs against China and all of that will surely be more evident. But for now at least, his plan has hit a snag.
But also from a political perspective, how will all of this play into Trump's image heading into the midterm elections in November next year?
There's so much at stake and in essence, there's even more uncertainty for markets to deal with now. There is scope for some short-term reprieve but depending on Trump's response, the initial reaction we're seeing might not hold in the big picture.
In any case, there's no doubt Trump's plans have hit a bit of a roadblock for the time being. But a diversion doesn't necessarily mean a change in course at the end of the day. So, keep that in mind.
This article was written by Justin Low at www.forexlive.com. Read More Details
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