Reports that the latest round of tariffs are “dead” are premature.
The Supreme Court recently ruled against several of the newer tariffs imposed under emergency trade authority. In a narrow decision, the Court concluded that the 1977 law granting the president certain emergency trade powers did not clearly authorize the broad tariff actions taken. As a result, several tariffs introduced over the past year were struck down.
Those included additional duties tied to immigration and drug trafficking concerns, tariffs aimed at narrowing trade deficits, and country-specific measures directed at Brazil and India. However, that does not mean tariffs as a policy tool are disappearing.
Existing tariffs on steel and aluminum remain in place. So do many of the China tariffs dating back to the first Trump administration. More importantly, there are other statutory pathways available for imposing tariffs. In fact, within days of the ruling, new tariff measures were announced under different legal authority.
In short, trade policy is likely to shift and adapt, but not revert to pre-2018 norms anytime soon.
Market Reaction May Be Temporary
Markets initially responded with optimism — equities rose and bond yields fell. But if tariffs continue under alternative authority, those moves may prove short-lived once investors reassess the broader policy direction.
Some commentators suggested that the Court’s decision would ease inflation pressures. That conclusion may be too simplistic. Tariffs can raise the cost of specific imported goods, but inflation in a broader sense depends on monetary conditions — particularly the balance between money supply growth and overall production. If monetary growth remains restrained, tariffs alone do not automatically create sustained inflation.
Longer-Term Political Realities
Regardless of the 2024 outcome, tariffs may have staying power beyond the current administration.
If a Republican administration follows, it is unlikely there would be a sharp reversal in trade policy. Tariffs generate revenue, and politically, they are increasingly framed as tools of economic and national security policy.
If a Democrat wins the presidency but faces a divided Congress, raising income or corporate taxes could prove difficult. In that environment, tariffs may remain an appealing revenue source, especially given today’s higher interest costs on federal debt.
Even under unified Democratic control, significant tariff reductions could be complicated by geopolitical tensions — particularly regarding China. Trade policy has become intertwined with national security considerations, making sweeping reversals politically risky.
Outstanding Legal Questions
One unresolved issue is whether previously collected tariffs will be refunded. The Supreme Court left that question to lower courts. Even if refunds are ultimately ordered, the process could take years and raise complex questions about who actually bore the economic cost.
The Bigger Picture
Trade policy is evolving, not disappearing. While individual measures may rise and fall through court decisions and administrative adjustments, the broader shift toward a more active trade posture appears durable.
Despite the ongoing debate, the economy continues to expand and inflation has remained relatively contained. Investors would be wise to focus less on headlines and more on long-term fundamentals.
Tariffs may change form, but they are unlikely to vanish.