Markets are grappling with new trade tensions following a significant ruling by the US Supreme Court, which invalidated former President Donald Trump’s extensive global tariffs last Friday. The ruling has sent ripples through financial markets, resulting in a decline in the US dollar, which fell by 0.4% against a basket of currencies today, extending losses from the previous week.
In response to the court’s decision, Trump announced a new temporary global tariff, originally set at 10% and quickly raised to 15%. This move signals the administration’s intent to persist with the use of trade levies as a tool for gaining leverage over other countries, despite the Supreme Court’s ruling. Economists from ING emphasize that these announcements reflect Trump’s unwavering approach to tariffs, asserting that uncertainty is back on the table, and the risk of trade escalations appears to be higher than it was a year ago.
As a consequence of the tariff revocation, US stock market futures indicate potential declines when trading resumes, suggesting Wall Street may see losses. Bitcoin has also faced downward pressure, dropping by 2.8% to around $65,734, following two weeks of stability above the $65,000 mark.
US Trade Representative Jamieson Greer attempted to reassure stakeholders by reaffirming the legitimacy of existing trade agreements with various countries. On CBS’s “Face the Nation,” Greer stated, “We want them to understand these deals are going to be good deals. We’re going to stand by them. We expect our partners to stand by them.” He clarified that the newly introduced 15% global tariff is separate from the bilateral agreements reached over the last nine months with about 20 countries, suggesting that arrangements made between the US and the UK, including one with Prime Minister Keir Starmer, would remain unaffected.
Nonetheless, UK Education Secretary Bridget Phillipson acknowledged the “uncertainty” that UK businesses face due to these developments.
In international markets, Australian stocks dropped by 0.6% as investors assessed the adverse implications of the 15% global tariff on exporter nations. In contrast, Hong Kong’s Hang Seng index surged by 2.4%, buoyed by the belief that certain countries, including China, might benefit from the new tariff structure. Market analysts note that despite Trump’s rapid declaration of a new tariff, the net tariff rate on Chinese goods is still expected to decrease compared to rates prior to the court ruling.
In a broader perspective, the Chinese Commerce Ministry is calling on the US to reconsider its tariffs, stating that unilateral tariffs are not in anyone’s best interest. They remarked that “there are no winners in a trade war,” highlighting the detrimental effects of protectionism.
Meanwhile, the impact of Trump’s new 15% tariff has been assessed by Global Trade Alert, which identifies that countries such as Brazil, China, and India will benefit from lower effective tariff rates under the new regime. The analysis indicates that these nations, which previously faced steep IEEPA surcharges, will see significant reductions in their tariff burdens.
As the US Customs and Border Protection agency prepares to halt the collection of tariffs deemed illegal by the Supreme Court, the market continues to react to this evolving situation. With the dollar selling off, the pound has gained ground, trading at $1.3523, while the euro has similarly risen to $1.1822.
The week ahead will continue to be marked by important economic reports, including the German IFO investor confidence survey, the Bank of England’s commentary, and US factory orders for December, which may further shape market sentiment amidst ongoing trade uncertainties.
