Latest Tariff Threats Lack Terror for Markets

In a development that didn’t surprise us in the least, tariff talk returned to headlines last week. Chiefly, President Donald Trump’s administration unveiled two “new” tariff threats and appealed a March court ruling ordering it to refund all tariffs paid under policies deemed unconstitutional by the Supreme Court (SCOTUS) in February. Headlines responded noisily, speculating on what each means for the economy and markets. Here we will take a brief dive into the “what” and “why” for each, but most importantly, we doubt they mean much for markets in the near or longer term. Stocks are showing—and have shown—they have long since dealt with tariffs. It would take an epic shock to change that, and nothing we have seen comes close.

Trump’s latest tariff threats follow his administration’s recent investigations into trade partners—and largely aim to reconstruct the levies upended earlier. The latest ones’ legal justification is Section 301 of the Trade Act of 1974, which gives the president the authority to investigate and respond to unfair foreign trade practices—especially those violating trade agreements or burdening US businesses. So, theoretically, if an administration can pin these charges on America’s trading partners, it gives them ground to lay tariffs. We (and many others) expected he would do precisely this after SCOTUS struck down his original tariffs.

Hence, last Monday, the administration proposed a 25% levy on Brazilian goods imports based on “unfair practices” hurting American businesses. The United States Trade Representative’s (USTR) investigation cited several infractions, including Brazilian officials’ failing to adequately enforce intellectual property rights and deforestation laws, combat corruption and bribery and provide access to Brazilian ethanol markets.^[i] While tariff-related details remain scant, the USTR will reveal more at a public hearing on July 6. After that, Brazil’s government will have until July 15 to take “responsive action.”

The next evening, Trump’s administration unveiled plans to slap tariffs of 10% to 12.5% on up to 60 of America’s trade partners, citing their failure to ban forced labor in exporting industries. The long list covers nations that account for roughly 99% of US imports.^[ii] The lower rate would hit trading partners that either have a ban on forced labor or have committed to imposing one, and the higher rate applying to all others.

Trump’s Department of Justice (DOJ) also filed an appeal in the US Court of International Trade (CIT) regarding the court’s March 4 ruling that that all importers of record who paid Trump’s (now struck down) tariffs implemented under the International Economic Emergency Powers Act were entitled to refunds from Customs and Border Protection (CBP). The decision, from Judge Richard K. Eaton, was widely seen as an open door to refunds for all such importers, not just those who sue the government for them—a bill amounting to around $166 billion.^[iii]

The DOJ’s appeal argues Eaton exceeded his authority in ordering universal refunds. In other words, Trump’s administration is trying to freeze the approximately $85 billion of tariff refunds currently in CBP’s refund system (of which around $20.6 billion has already been paid) and cancel out the rest, arguing importers shouldn’t automatically be refunded unless their own individual cases succeed.^[iv] Eaton’s logic is that small businesses who paid may not have the technical know-how or legal counsel to actually file suit and get in line to collect. According to Bloomberg, public corporations have only filed for around $7.3 billion in tariff refunds—though this number could rise.^[v]

As we have said throughout this saga, the issue of refunds is a sideshow. It is small when scaled next to the economy and tax revenue, a one-time factor and likely proceeds glacially. This appeal illustrates why—even now, months after the ruling, only small sums have been paid. The majority hasn’t and it is headed back to court, which may wind up back with SCOTUS. This won’t move fast.

Even the “new” tariffs lack much market impact. For one, Trump’s renewed tariff threats are widely expected—now and in the future. They were widely considered Plan B before SCOTUS’s original decision in February, when Trump publicly alluded to this.^[vi] Secondly, the headline threat far exceeds reality. Exemptions are one reason, as Brazil’s new tariffs reportedly exempt key exports to the US like beef, oil, metals, coffee, aircraft equipment and certain fruits and vegetables.^[vii] Well over half of imports from Brazil will see no effect from this. Early reports also suggest Trump’s broad, 60-nation tariffs likely exclude hot ticket items like electronics and AI-related products.^[viii] Then there are deals, like the EU’s, which USTR Jamieson Greer said will stand regardless of the new tariff threats. If so, the state of play didn’t much change with the new proposal. It is more an extension of the current global tariff that is set to expire in late July. Then there are potential workarounds, like transshipping, that tariffed nations have already been employing.

Perhaps most importantly, markets have seen this movie before. Yes, you can get volatility for any or no reason, as Friday’s rate hike fear-based selloff seemingly illustrates. But stocks have already shrugged this tariff news off, which should continue. Yes, Trump’s Liberation Day tariffs provided an initial shock on April 2, 2025—hence markets’ sharp decline. But that was stocks’ pre-pricing the worst-case scenario of America’s trade partners banding together and retaliating against a high, long-lasting US tariff wall. But as markets’ swift recovery following Trump’s April 9 tariff pause showed, stocks quickly recognized tariffs’ limited influence on a resilient world economy. Now, after more than a year of near-constant tariff news, the shock power is gone, for good and ill.

To be clear, we still think tariffs are economic negatives. But markets move most on surprise, and there is essentially none here.