The Tariff Ruling... Ruling
- Richard Murff
- 2 days ago
- 3 min read
Just relax, the water's warm
So, there has been a ruling on the ruling on the Liberation Day tariff declaration: Carry on until the court hears arguments to make another ruling. Clear enough?
Well, I’m sure the quants and the economists are weighing it on what happens next, but the numbers here don’t matter. Entirely too much of the rodeo is dependent on the impulses of one person. And to understand the impulses of our lizard brain an economics degree is of little use. You’re better off listening to drinking stories of your grandfather’s generation. Which was where I learned that if you are going to boil a frog, you can’t just chuck the little creatures into a boiling pot, their reflexes are so quick that they’ll leap from the roiling surface and bolt for freedom. The trick, I’m told, is to put them in the water that’s just warm enough to be relaxing and let it heat up slowly. This way you don’t get that knee-jerk reaction, just some paddling about in a big jacuzzi until you are too relaxed to do much about when it slowly dawns on you that you’re getting cooked.
That’s about as good a metaphor as any to keep in mind as we consider what’s next in the tariffs chaos that started on 2 April. Blindsiding investors with the highest tariffs since the Depression caused them to react like frogs thrown into a boil. And out they leapt, triggering market chaos across stocks, bonds and currencies, along with wild speculation that the end was nigh. It was the bond market that did it - I’m not sure the Pope would ignore the bond market. As it was, Trump imposed a 90-day pause on the “reciprocal” tariffs more market whiplash finally immortalized in the TACO - Trump Always Chickens Out - trade. The danger being that the president was so offended by the term that he was liable to dig his heels and break something out of spite.
The fire-break was provided by a lawsuit against the White House arguing that the president didn’t have the authority to levy most of the tariffs in the first place - and the US Court of International Trade agreed. And say what you like about the Trump administration, but they’ve got experience filing appeals, they moved fast. And so it was that this week a federal appeals court reinstated many of Trump’s tariff’s - but only temporarily - until it can make a permanent ruling. Which won’t happen until it hears arguments in late July.
This is where the timing gets funny: the self-imposed 90-pause on the hairier tariffs runs out on 9 July. As of this writing, Trump has announced that he’ll send “take it or leave it” unilateral trade deals to countries in about two weeks. If so, we’re facing another whiplash between re-imposition of the tariffs and a ruling on their legality.
Fortunately, the odds of that happening are dropping. Aside from press releases and “really very good” phone calls, the administration hasn’t made much progress on trade talks with anyone. For his part, Scott Bessent, US Treasury Secretary has said that the 90-day pause might be extended to countries negotiating in “good faith.” That would push the pause beyond the ruling one way or the other. At least thats the smart move, so it has Bessent’s fingerprints all over it.
As for the ruling, most likely, Trump is going to lose. The stated rules are just a little too clear on this one. He may appeal but for all the flack the Supreme Court is getting for its conservative reading of the law, it really doesn’t appear to be in Trump’s back-pocket as critics complain. In the end, the most likely scenario isn’t a constitutional crisis (not over this at any rate) but the administration taking a quiet loss, blaming it on corrupt judges and start hollering about something else. Immigration riots in sanctuary cities is something that charge his base with more voltage that something as dull as trade talks.
Political violence aside, the long-term economic danger is systemic. The trend towards globalization that has kept prices down and growth up for the last 30 years is reversing - and has been for about a decade. In 2015 both Trump and Clinton promised to scrape Obama’s Trans Pacific trade agreement. The 10% across the board tariff’s aren’t really up for discussion, and if Trump had to go to congress, he’d get his way. So they are here for the duration.
Ten percent tariffs aren’t boiling water like the Liberation Day. They are pretty warm by historic standards, but tolerable. After the chaos of the first 100 days or so, even welcome. But inflationary pressures will build slowly, so will the head-winds on global trade.
It’ll all seem normal. It’ll taste like chicken, but eventually we’ll be cooked.
