Fin-X Pulse 30th May 2025

The April 2nd tariffs remain in place after an overnight temporary ruling. But the market could be underestimating the importance of the court's decision yesterday which may yet have significant implications for US fiscal policy.

• Overnight, the Trump administration obtained a ruling to keep the April 2nd trade tariffs in place, pending an appeal hearing. The plaintiffs have until 5th June to submit arguments and the government until 9th June. The government may, however, seek a ruling from the Supreme Court in the interim.

• Sell-side analysts have also highlighted a clause hidden in the recent tax bill. Section 899 of the bill that passed the House of Representatives last week would allow the US to impose additional taxes on companies and investors from countries that it deems to have punitive tax policies. It could raise taxes on a wide range of foreign entities, including US-based companies with foreign owners, international firms with American branches and investors.

• President Donald Trump also met yesterday with Federal Reserve Chair Jerome Powell and again asked for lower interest rates. The release indicated that Powell and his Fed colleagues remain committed to setting monetary policy on “careful, objective, and non-political analysis.”

• S&P500 5,912 +0.4%, Nasdaq Comp. 19,176 +0.4%, S&P/ASX200 8,395 -0.2%,

• US 2yr 3.94% +1bps, US 10yr 4.43% +1bps

• US dollar (DXY) index 99.3 -0.6%, AUDUSD 0.6442 +0.3%, Gold US$/oz 3,312 -0.2%

Fin-X Wealth View

• President Trump's tariff plans have hit a major roadblock that most likely requires intervention by Congress.

• The legal basis to impose the emergency tariffs appears so shaky that if the Supreme Court chooses to find for the government, the trade war would be back on, but it would also raise questions of authoritarianism and the rule of law. We doubt that the justices would choose to go that far.

• Sectoral tariffs could, however, remain in place as they are founded on a different national security text.

• The case could prove to be highly significant. With Elon Musk's official departure from the White House yesterday and the current tax proposal, spending cuts are essentially insignificant. If the 10% and other country tariffs are also set aside, Trump's agenda becomes highly expansionary with a clear emphasis on tax cuts and deregulation.

• This would likely keep or push yields higher, and boost smaller business revenues. It could spark a significant rotation from expensive large-cap American growth stocks to cheaper and recovering smaller and value names.

• Lastly, if passed, the tax bill appears to open another avenue to go after businesses rather than countries, which slows down action and makes the analysis much more complex but likely dissuades foreign firms from conducting business and investing in the US.