U.S. Court Rules Against President Trump’s Tariffs.
The U.S. Supreme Court has ruled against U.S. President Donald Trump’s broad emergency tariffs, adding further uncertainty to the current global macro landscape. The chaos is going to be fuelled by trading partners – such as European Union, Mexico, Canada, South Korea – now likely to pause or reassess their trade deals with the U.S., while waiting for further clarity on the administrations next move. Justice Brett Kavanaugh noted that President Trump may have work around and that the issue of refund is unresolved:
“…So the Court’s decision is not likely to greatly restrict Presidential tariff authority going forward…one issue will be refunds. Refunds of billions of dollars would have significant consequences for the U.S. Treasury. The Court says nothing today about whether, and if so how, the Government should go about returning the billions of dollars that it has collected from importers…”
We believe markets will likely assume the Administration has a workaround for this decision. Indeed, post the ruling President Trump has announced new temporary 15% tariffs on imports from all countries under Section 122, which allows the President impose tariffss for up to 150 days (extension beyond will require Congress approva. As per U.S. Treasury Secretary Scott Bassent comments that these tariffs will provide a bridge (ensuring revenue continues to flow to Treasury) while they consider alternatives. The U.S. dollar (USD) hasn’t moved much on the information which would suggest investors are not worried about U.S. being able to pay its bills / balance-of-payments crisis as a result of this ruling. In any case, the 150 days bridging tariffs will again drive volatility as importers again try to second guess the outlook for tariffs and whether to change their purchasing strategy to avoid these new tariffs.
From a markets perspective, the latest developments will likely benefit consumer goods (see global names for ideas), China (ASX listed CETF – China A50) and Brazil (US listed EWZ – Brazil ETF).
Our high conviction call deliver – EM Debt. Most investors have paid little attention to EM debt but we have pushed the EM debt story for the past 3-5 years and it has been our preferred global high yield play.
We have been used in our multi-asset strategies and recommend clients use the VanEck Emerging Income Opportunities Active ETF (EBND). EBND is an actively managed (we havee been meeting the PM regularly) and is something we have recommended for the past 3-5 years (its outperformed – see chart below provides 5 years…although 3yr perfomance ~10% p.a.). Current running yield is 5.91%, mostly emerging market governments and it also benefits from a lower USD.
