By John Lau, CPA, CFP®
June 2, 2025 – Last week brought unexpected volatility to U.S. trade policy. The Court of International Trade blocked most of the administration’s 2025 tariffs, ruling that the International Emergency Economic Powers Act (IEEPA) does not give the president the authority to impose such tariffs. But within 24 hours, the U.S. Court of Appeals for the Federal Circuit issued a stay on that decision, leaving the tariffs in place—for now—while the appeals process plays out, possibly ending up at the Supreme Court in the coming weeks.
At first glance, this legal tug-of-war might seem bullish for markets. After all, many analysts agree that without the drag of tariffs, equities would likely be testing all-time highs. But in my view, this decision isn’t a meaningful bullish catalyst, nor does it significantly alter the market outlook.
Markets Crave Clarity—And This Isn’t It
Tariffs remain a headwind for both economic growth and corporate earnings. While the court decision raises the possibility of temporary relief, it has also reignited policy uncertainty—and that is a major issue. Markets and businesses need stability to plan and invest. When trade policy becomes a game of legal ping-pong, caution takes over. And too much caution can tip an already fragile economy toward slowdown.
Even if the courts ultimately strike down the IEEPA-based tariffs, that’s unlikely to end the matter. The administration views tariffs as a core strategic tool and is expected to pivot quickly to other legal justifications—such as Section 122 or Section 301 of the Trade Act of 1974. This risks turning trade policy into a game of regulatory whack-a-mole, leaving businesses and consumers in a state of perpetual limbo.
A Positive, But Not a Clear One
Yes, the court’s decision technically reduces the chance of a worst-case tariff scenario, which is a net positive. But the ruling’s likely consequence—months of legal challenges, appeals, and legislative maneuvering—injects even more uncertainty into an already murky outlook. That’s not inherently bearish, but it’s certainly not the kind of clarity markets need to continue rallying higher.
Focus on the Economy, Not the Noise
The bigger issue is the economy. Last week showed early signs of softness in the data, and this week could be pivotal. If economic indicators confirm weakness, concerns about a slowdown will overshadow tariff headlines. This market is not priced for a real downturn; even a 5% drop wouldn’t fully reflect the risks.
Strategy: Stay Long, Stay Low-Beta
I remain constructive on the long-term outlook but cautious in the near term. In my view, the best way to stay invested in this environment is through low-volatility, low-beta sector ETFs. These provide upside exposure while helping to manage risk. Corporate earnings and the economy still deserve the benefit of the doubt—but if the slowdown accelerates, the S&P 500 could fall quickly and deeply.
In short: The tariff headlines matter, but not as much as the underlying economic data. Keep your eyes on the fundamentals, not just the legal theater.
Where Do We Stand with Tariffs and How Important Are They for Markets?
By John Lau, CPA, CFP®
June 2, 2025 – Last week brought unexpected volatility to U.S. trade policy. The Court of International Trade blocked most of the administration’s 2025 tariffs, ruling that the International Emergency Economic Powers Act (IEEPA) does not give the president the authority to impose such tariffs. But within 24 hours, the U.S. Court of Appeals for the Federal Circuit issued a stay on that decision, leaving the tariffs in place—for now—while the appeals process plays out, possibly ending up at the Supreme Court in the coming weeks.
At first glance, this legal tug-of-war might seem bullish for markets. After all, many analysts agree that without the drag of tariffs, equities would likely be testing all-time highs. But in my view, this decision isn’t a meaningful bullish catalyst, nor does it significantly alter the market outlook.
Markets Crave Clarity—And This Isn’t It
Tariffs remain a headwind for both economic growth and corporate earnings. While the court decision raises the possibility of temporary relief, it has also reignited policy uncertainty—and that is a major issue. Markets and businesses need stability to plan and invest. When trade policy becomes a game of legal ping-pong, caution takes over. And too much caution can tip an already fragile economy toward slowdown.
Even if the courts ultimately strike down the IEEPA-based tariffs, that’s unlikely to end the matter. The administration views tariffs as a core strategic tool and is expected to pivot quickly to other legal justifications—such as Section 122 or Section 301 of the Trade Act of 1974. This risks turning trade policy into a game of regulatory whack-a-mole, leaving businesses and consumers in a state of perpetual limbo.
A Positive, But Not a Clear One
Yes, the court’s decision technically reduces the chance of a worst-case tariff scenario, which is a net positive. But the ruling’s likely consequence—months of legal challenges, appeals, and legislative maneuvering—injects even more uncertainty into an already murky outlook. That’s not inherently bearish, but it’s certainly not the kind of clarity markets need to continue rallying higher.
Focus on the Economy, Not the Noise
The bigger issue is the economy. Last week showed early signs of softness in the data, and this week could be pivotal. If economic indicators confirm weakness, concerns about a slowdown will overshadow tariff headlines. This market is not priced for a real downturn; even a 5% drop wouldn’t fully reflect the risks.
Strategy: Stay Long, Stay Low-Beta
I remain constructive on the long-term outlook but cautious in the near term. In my view, the best way to stay invested in this environment is through low-volatility, low-beta sector ETFs. These provide upside exposure while helping to manage risk. Corporate earnings and the economy still deserve the benefit of the doubt—but if the slowdown accelerates, the S&P 500 could fall quickly and deeply.
In short: The tariff headlines matter, but not as much as the underlying economic data. Keep your eyes on the fundamentals, not just the legal theater.
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