Tariff : Facing a Legal Wall to Climb

The US administration celebrated $30 billion in monthly collections from tariffs after the new rates took effect at the start of August. On Friday, a federal appeals court ruled that the use of IEEPA for tariffs was an overreach of its powers. Though the court has stated that it will allow the tariffs to continue till it issues an order on 14th October.

This triggered a series of posts by the President that such an order would result in global humiliation and put the country on a path of failure. Even the administration interviews mentioned the same theme.

The timeline is crucial as the Supreme Court opens on the first Monday of October, that is, the 6th of October. Though administration is likely to file an appeal before, it will be addressed when it reopens.

The base case scenario is that the Supreme Court puts a stay on the order and hears the case. This would lead to continuing tariff collections until the final hearing is done. 

The worst-case scenario is not providing a stay or final order, which is against the tariff's legality. The administration would have to use other legal powers to apply such tariffs, which would take a longer period. Meanwhile, it would lead to importers filing for refunds, and the future payments would be cancelled. 

This reintroduces volatility and uncertainty to tariff policy in the coming months, and that can also lead to a change in market direction as the wait for clarity prolongs.