Warnings and Rising Uncertainty
U.S. President Donald Trump warned that America would “suffer greatly” if the administration loses the ongoing tariff lawsuit, hinting at the possibility of canceling major trade agreements with key partners such as the European Union, Japan, and South Korea. This comes after a federal appeals court ruled that a large portion of the tariffs was illegal, while temporarily keeping them in place pending Supreme Court review. The Justice Department has requested an expedited review, with procedural decisions expected in September and a hearing likely in November ,raising political and economic uncertainty in the short term.
Market Implications
The development has clear spillovers into financial markets. Import-dependent sectors such as retail, autos, and equipment may face headwinds from higher input costs and tighter margins, while domestic competitors could benefit. Inflation expectations may rise as tariff costs are passed on to U.S. importers and consumers, pushing bond yields and breakevens higher, and making equities more sensitive to monetary tightening. Meanwhile, the dollar could see short-term support from safe-haven flows, while gold and industrial metals remain volatile, with gold potentially benefiting if uncertainty deepens.
Possible Market Scenarios
Looking ahead, markets face two tactical scenarios. If the Supreme Court grants a stay and upholds the tariffs, consumer and import-heavy sectors may remain under pressure, Treasury yields could rise, and market volatility may increase. On the other hand, if the Court strikes down most tariffs, import-focused stocks may rebound, inflation and yields could ease, and global risk appetite would likely improve. In both cases, political risk premiums are expected to remain priced in until the Court delivers a final ruling.
