The Court of International Trade, an Article III Constitutionally created by Congress to adjudicate trade disputes since the 18th century, dropped what at first appeared to be a bombshell ruling last night which is best summarized by the conclusion below:
The equity futures almost instantly skyrocketed almost 2% or more as the headline, not the analysis, created more irrational exuberance heading into the traditional month end window dressing. Naturally after everyone hyperventilated, the legal minds and experts broke down the 49 page ruling and found the other options which might indicate this wasn’t as big a deal as initially promoted.
First and foremost this excerpt from Goldman Sach’s analysis published this morning speaks volumes as to the problem most of the markets missed:
Goldman notes that sector-based tariffs, like those already applied to steel and autos under Section 232, remain unaffected by the court ruling. Phillips adds, “We already expect additional sectoral tariffs (pharmaceuticals, semiconductors/electronics, etc.) and uncertainty regarding the IEEPA-based tariffs could lead the White House to put more emphasis on sectoral tariffs, where there is much less legal uncertainty.”
He also flags Section 338 of the 1930 Trade Act as another tool available to the president, though it’s never been used and doesn’t require congressional input. Overall, Goldman calls the court ruling a “nothingburger” given the other options still available to impose trade measures.
Is this a nothingburger?
Probably so, but be prepared for a major somewhat angered Taco-Man backlash as he was active on Truth Social at 10:30 pm last night and instead of typing out an all capital letter rant, he simply posted this meme:
I circled the Pepe the Frog meme for my readers could not miss that.
If President Trump is now reviewing everything available to his administration, odds are it will not take long for a new tariff structure to be released, perhaps without retaliating against major trade nemesis like the Falkland Islands this time.
For example the table below, via the Goldman release, illustrates many of the options Trump indeed has.
The media, as well as parts of the ruling, seem to favor the Section 122 option, almost promoting that option. But due to the limited nature of this law, odds are Section 301 and for the first time history Section 338 tariff regimes are the probable options while the IEEPA ruling is appealed.
The problem for the administration is that this could initiate an miscalculation by foreign leaders of Trump’s Executive Branch authority which gives them the overconfidence to stall or engage in delaying tactics while negotiating with US officials. That very act could create secondary non-economic retaliatory acts such as what Trump engaged in with China last night banning student visas and barring exports of certain items.
So for all of the cheerleaders stating this was a nothingburger beware; it could become one very angry Taco-Man revenge tour as his anger over the court’s ruling could make negotiations even more difficult and the new tariff regime almost litigation proof.
An en banc panel of the Court of Appeals for the Federal Circuit stayed enforcenent of the ruling of the Court of 8nternational Trade, pending the outcome of the trial.