President Trump’s tariff trade war has gone through twist and turns over the past week.
It started on Wednesday when the US Court of International Trade declared all the tariffs unilaterally imposed using the International Emergency Economic Powers Act (IEEPA) must be voided immediately.
Following this…
The US Court of Appeals paused the Trade Court’s ruling to consider an appeal from the Trump Administration. The plaintiffs and Trump administration have until the 5th and 9th of June to respond, respectively.
Win or lose, Trump is not going to back down…
Here’s why…
Trump has tools he can use to keep tariffs in place…
While the president does have the power under the IEEPA to implement tariffs without US Congress’ input… there needs to be an actual emergency involved.
Trade deficits unfortunately for Trump, do not constitute an “emergency”.
Nevertheless, if you think Trump will just accept the ruling and move on, think again. If the administration’s appeal fails, then there are others moves
Trump will most likely make to keep tariffs intact…
Firstly, under the Trade Expansion Act of 1962, the president has the authority to impose tariffs on imports deemed to be a national security threat.
That’s how Trump justified the tariffs on steel and aluminium earlier this year, for example.
Separately, the Trade Act of 1974 gives the president the authority to levy tariffs in response to unfair trade practices, like intellectual property theft.
Both Trump and Biden used this to justify tariffs on China.
Given Trump’s insistence that trade deficits are “unfair,” he could simply reimpose the Liberation Day levies using the 1974 Act as justification.
The good news is, if Trump manages to reissue new tariffs under these orders, the effective average tariff rate — which had spiked from 3% in 2024 to 30% in the wake of Liberation Day — would fall to around 15%.
Small tariffs = good for economy and stocks
The market, economy and companies can digest smaller tariffs. It also means inflation may not spike as high as previously forecasted.
Already, tariffs have cost companies more than $34 billion in lost sales and higher expenses, according to a Reuters. So, the lower effective average tariff rate may be a blessing in disguise for Trump.
We’ll see how this plays out over the next week or so. In the meantime, I expect volatility in the markets to resurface this week. But remember: every trade war-induced sell-off this year has ended up being a stellar buying opportunity.
So, keep your eyes on the markets for any good deals. Or join our South African Investor community for the best opportunities.
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