US investors who returned from the Labor Day holiday on Tuesday were surprised by a new uncertainty in trade policy, after a federal court of appeals considered most of the comprehensive tariffs imposed by President Donald Trump.
The main rates of Wall Street fell about 1% on Tuesday, while income from the longest time treasure securities rose, amid a global sale of securities motivated by tax concerns.
The court allowed the rates to remain in force until October 14 to give the Trump government the opportunity to resort to the US Supreme Court. However, the decision did not affect the tariffs applied to steel and aluminum.
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Several market participants claimed to be waiting, as the case should be taken to the Supreme Court. Increasing uncertainty is added to other market concerns, such as Federal Reserve independence and increased US stagflation risks.
“Whether due to the level of tariffs, the moment or doubts about their validity, we can only wait for the developments,” said Jim Baird, plante director of Plant Moran Financial Advisors, about the recent court decision.
“We still don’t know what this will mean in the short term. How will our business partners react?
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Trump’s high rates imposed on business partners have caused market volatility in early April, but the greatest clarity on rate levels and expectations of interest cuts helped actions to recover and reach record levels.
“In a medium-term horizon, we believe that corporate uncertainty about tariffs will remain high, although smaller than in late spring,” Lori Calvasina, head of US stock market strategy, said in a statement.
No change in Trump’s tariff agenda is expected
Treasury Secretary Scott Bessent said on Monday that the government has a reserve plan if the Supreme Court does not validate the use of Trump’s emergency powers to impose tariffs.
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One of the tariff alternatives mentioned is section 338 of the 1930 Smoot-Hawley Tariff Law, which allows the president to impose rates of up to 50% for five months against imports from US commerce countries.
Ed Mill, Raymond James’s policy analyst, stressed that there are several other tariff authorities available for the Trump administration, reinforcing the idea that “the process can change, but the result of tariffs will remain practically the same.”
However, some investors fear that if the current decision is upheld, the US may have to reimburse rates to their business partners – a measure that could aggravate tax concerns.
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“The big question will be whether the courts will determine that all rates charged under emergency powers should be refunded, which could represent a decision of nearly $ 200 billion,” Glenmede’s strategists warned in a statement.
