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Business Times
08-07-2025
- Business
- Business Times
S&P 500 at record high: Is the worst of the trade war behind us?
THE S&P 500 surpassed its February peak last week, reaching multiple new all-time highs amid optimism over trade negotiations and confidence that the economy and corporate earnings can withstand the impact of tariffs. On Jul 2, the United States reached a trade agreement with Vietnam, lowering tariffs on Vietnamese exports to 20 per cent from the 46 per cent announced on 'Liberation Day', while goods shipped through Vietnam will be taxed at 40 per cent. Meanwhile, US non-farm payrolls rose by 147,000 in June, exceeding expectations of 110,000. The unemployment rate also unexpectedly fell from 4.2 per cent to 4.1 per cent. But with growth and inflation risks still lingering, is the rally of the US stock market getting ahead of reality? Inflation set to rise US inflation has remained relatively subdued despite the Trump administration's tariff hikes since the start of the year. In May, the consumer price index (CPI) rose 2.4 per cent year on year, in line with expectations, while core CPI increased 2.8 per cent, below the forecast of 2.9 per cent. Although the US Federal Reserve's preferred inflation gauge – the core personal consumption expenditures (PCE) price index – came in slightly above expectations at 2.7 per cent versus 2.6 per cent, it remained in line with levels seen in the second half of 2024, prior to the introduction of tariffs. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The soft inflation numbers can be attributed to several factors, including businesses stockpiling inventories ahead of the tariff implementation and absorbing part of the tariff-related cost increase. At the same time, core services inflation has been moderating, with shelter inflation – a major contributor to sticky inflation in the services sector – trending downward. As pre-tariff inventories begin to run out and rising costs begin to weigh on profit margins, more and more companies may have no choice but to pass on higher costs to consumers. In its latest earnings call, Nike announced plans to raise prices to offset an expected US$1 billion of additional tariff costs in its 2026 fiscal year, while other companies, such as Walmart and Macy's, have also flagged similar intentions. Importantly, we expect the US effective tariff rates to remain elevated in the 10 to 20 per cent range, as President Donald Trump has yet to agree to rates below 10 per cent for any trading partner. Although the tariffs imposed under the International Emergency Economic Powers Act of 1977 (fentanyl and 'Liberation Day' reciprocal tariffs) have been deemed illegal by the US Court of International Trade and could eventually be struck down if appeals fail, we believe Trump will still find alternative ways to implement his desired tariff regime. This includes the use of Section 232 of the Trade Expansion Act of 1962, which allows a US president to restrict imports that are deemed to threaten national security. This is already being used to impose tariffs on steel, aluminium and autos, and could be extended to other sectors. Additionally, tariff revenue has taken on renewed importance, with the One Big Beautiful Bill (OBBB) projected to widen the US fiscal deficit by approximately US$3.4 trillion over the next decade. Without tariffs, that shortfall would be even greater. Therefore, we see little chance of US effective tariff rates reverting to the 2 to 3 per cent range. Slowing consumption to weigh on growth Naturally, higher prices tend to dampen consumption, and signs of a slowdown are beginning to emerge. Final real gross domestic product figures released on Jun 26 showed that the US economy contracted by 0.5 per cent quarter on quarter in the first three months of 2025 – worse than the estimate of minus 0.2 per cent and a sharp reversal from the 2.4 per cent expansion in the previous quarter. While much of the decline was driven by a surge in imports, as households and businesses rushed to front-load purchases ahead of new tariffs, a slowdown in consumer spending was also a key contributor. Consumer spending rose just 0.5 per cent, down significantly from 4 per cent in the prior quarter, as tariff disruptions weighed on sentiment. Monthly indicators told a similar story, with PCE and retail sales falling 0.1 and 0.9 per cent month on month, respectively. With consumption making up nearly 70 per cent of GDP, a slowdown in household spending is likely to be a drag on economic growth in the coming quarters. Even so, a sharp rebound in second-quarter GDP is possible as the surge in imports seen earlier this year begins to fade. On a positive note, the labour market remains resilient, with the unemployment rate remaining low at 4.1 per cent. While wage growth has moderated in recent months, it is still relatively solid. Together with the extension of the existing tax breaks and the roll-out of new personal tax cuts under the OBBB, these factors should continue to support consumer spending and help cushion against a severe economic downturn. Downward earnings revisions likely With the US economy likely to enter a period of mild stagflation, current consensus estimates for 2025 earnings growth of around 11 per cent appear overly optimistic. In the coming months, we expect tariffs to weigh more heavily on profit margins, bringing earnings growth closer to the range of 4.5 to 6 per cent. At current prices, this suggests limited upside for the S&P 500. Nonetheless, there are still bright spots in the US stock market. The tech sector continues to stand out, with earnings growth expected to outpace other sectors. This is supported by rising artificial intelligence adoption and relatively limited exposure to tariffs. In today's uncertain environment, we believe it is more important than ever to be selective and to focus on companies with strong balance sheets and structural growth drivers. The writer is a research analyst with the research and portfolio management team of FSMOne Singapore, the B2C division of iFast Financial
The Hill
11-06-2025
- Business
- The Hill
Trump tariffs to remain in place pending appeal, court rules
A federal appeals court on Tuesday agreed to let many of President Trump's sweeping tariffs on United States trade partners remain in effect for now, extending a pause issued late last month after a separate court ruled the tariffs were illegal. The Federal Circuit Court of Appeals granted the Trump administration's request for a longer pause after issuing a temporary stay of the lower court ruling last month. The court put the case on a fast track to be resolved by the end of this summer, noting that 'these cases present issues of exceptional importance warranting expedited en banc consideration of the merits in the first instance.' The decision comes after the U.S. Court of International Trade ruled on May 28 that Congress did not delegate 'unbounded' tariff authority to the president in the International Emergency Economic Powers Act of 1977 (IEEPA), the linchpin of Trump's legal defense. Trump appealed the ruling and, hours later, the appeals court granted the temporary stay and agreed to hear arguments in the case on June 9, when the court said it would decide on a longer pause. 'Both sides have made substantial arguments on the merits. Having considered the traditional stay factors… the court concludes a stay is warranted under the circumstances,' the order read on Tuesday. Trump has sought to impose tariffs on almost all U.S. trading partners since taking office, creating whiplash in financial markets as he repeatedly delayed or adjusted the announcements.
Hamilton Spectator
08-06-2025
- Business
- Hamilton Spectator
As his trade war faces legal pushback, Trump has other tariff tools he could deploy
WASHINGTON - U.S. President Donald Trump's tariffs are facing legal headwinds for the first time — but he has other tools he could deploy in his quest to realign global trade. A federal appeals court is still deciding whether there will be a stay on Trump's universal tariffs enacted through the International Emergency Economic Powers Act of 1977, usually referred to by the acronym IEEPA. The U.S. Court of International Trade ruled the duties were unlawful last month. IEEPA is a national security statute that gives the U.S. president authority to control economic transactions after declaring an emergency. It had never previously been used for tariffs. Trump declared emergencies at the United States' northern and southern borders linked to the flow of fentanyl and migrants in order to hit Canada and Mexico with economywide tariffs. He later declared an emergency over trade deficits to impose his retaliatory 'Liberation Day' duties on most nations. The trade court found Trump exceeded presidential powers by using IEEPA to broadly implement the duties. The Trump administration quickly appealed the decision and the White House said it would take the case to the Supreme Court. Following the ruling, White House Economic Council Director Kevin Hassett said he was confident the court ultimately would decide in Trump's favour. Hassett said that if it doesn't, 'we'll have other alternatives that we can pursue as well to make sure that we make American trade fair again.' While the U.S. Constitution gives power over taxes and tariffs to Congress, Greta Peisch, the former general counsel for the Office of the U.S. Trade Representative, said it passed laws over the last century that allow the president some control in certain situations. Trump is now looking to use those laws — some of them for the first time. The president may be considering Section 338 of the Tariff Act of 1930. It allows a president to hit countries with tariffs of up to 50 per cent if the country 'is treating products of the United States disfavourably, compared to products of another foreign country,' said Peisch, a partner at Wiley Rein in Washington, D.C. Section 338 has never been used by a president before and Peisch said it might be difficult for the administration to make a case for it. Trump also might look to Section 301 of the Trade Act of 1974, which allows a president to take trade actions if an investigation finds a trading partner's policies are unreasonable and discriminatory. Trump used this law during his first administration to impose tariffs on some Chinese imports and European Union goods. But Section 301 requires country-by-country investigations of trade policy before a tariff can be imposed — investigations that could take weeks or months and would include a period for public comment. That certainly would slow down Trump's efforts to target the world with tariffs. If the president is looking for speed, Peisch said, he might try to use Section 122 of the Trade Act of 1974 — another law that has never before been used. Section 122 allows a president to implement tariffs of up to 15 per cent to address large and serious United States balance-of-payments deficits. But those duties can only stay in place for a maximum of 150 days before they need Congressional approval to continue. That reduces Trump's leverage if his goal is to pressure countries to sign trade deals — those countries could simply decide to wait the president out. Trump also has said tariffs will help pay down the deficit; the short-term Section 122 power is unlikely to work as a long-term revenue strategy. Ultimately, Peisch said, none of the replacement statutes could easily build Trump's universal tariff wall around the United States. 'Nothing is a great fit without a lot of work,' she said. 'So I think it's potentially going to be a challenge.' This report by The Canadian Press was first published June 7, 2025.
Toronto Sun
07-06-2025
- Business
- Toronto Sun
As his trade war faces legal pushback, Trump has other tariff tools he could deploy
Published Jun 07, 2025 • 3 minute read President Donald Trump speaks during a meeting with Republican governors at Mar-a-Lago, Thursday, Jan. 9, 2025, in Palm Beach, Fla. Photo by Evan Vucci / THE ASSOCIATED PRESS WASHINGTON — U.S. President Donald Trump's tariffs are facing legal headwinds for the first time — but he has other tools he could deploy in his quest to realign global trade. This advertisement has not loaded yet, but your article continues below. THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY Subscribe now to read the latest news in your city and across Canada. Unlimited online access to articles from across Canada with one account. Get exclusive access to the Toronto Sun ePaper, an electronic replica of the print edition that you can share, download and comment on. Enjoy insights and behind-the-scenes analysis from our award-winning journalists. Support local journalists and the next generation of journalists. Daily puzzles including the New York Times Crossword. SUBSCRIBE TO UNLOCK MORE ARTICLES Subscribe now to read the latest news in your city and across Canada. Unlimited online access to articles from across Canada with one account. Get exclusive access to the Toronto Sun ePaper, an electronic replica of the print edition that you can share, download and comment on. Enjoy insights and behind-the-scenes analysis from our award-winning journalists. Support local journalists and the next generation of journalists. Daily puzzles including the New York Times Crossword. REGISTER / SIGN IN TO UNLOCK MORE ARTICLES Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account. Share your thoughts and join the conversation in the comments. Enjoy additional articles per month. Get email updates from your favourite authors. THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK. Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account Share your thoughts and join the conversation in the comments Enjoy additional articles per month Get email updates from your favourite authors Don't have an account? Create Account A federal appeals court is still deciding whether there will be a stay on Trump's universal tariffs enacted through the International Emergency Economic Powers Act of 1977, usually referred to by the acronym IEEPA. The U.S. Court of International Trade ruled the duties were unlawful last month. IEEPA is a national security statute that gives the U.S. president authority to control economic transactions after declaring an emergency. It had never previously been used for tariffs. Trump declared emergencies at the United States' northern and southern borders linked to the flow of fentanyl and migrants in order to hit Canada and Mexico with economywide tariffs. He later declared an emergency over trade deficits to impose his retaliatory 'Liberation Day' duties on most nations. Your noon-hour look at what's happening in Toronto and beyond. By signing up you consent to receive the above newsletter from Postmedia Network Inc. Please try again This advertisement has not loaded yet, but your article continues below. The trade court found Trump exceeded presidential powers by using IEEPA to broadly implement the duties. The Trump administration quickly appealed the decision and the White House said it would take the case to the Supreme Court. Following the ruling, White House Economic Council Director Kevin Hassett said he was confident the court ultimately would decide in Trump's favour. Hassett said that if it doesn't, 'we'll have other alternatives that we can pursue as well to make sure that we make American trade fair again.' While the U.S. Constitution gives power over taxes and tariffs to Congress, Greta Peisch, the former general counsel for the Office of the U.S. Trade Representative, said it passed laws over the last century that allow the president some control in certain situations. Trump is now looking to use those laws — some of them for the first time. This advertisement has not loaded yet, but your article continues below. The president may be considering Section 338 of the Tariff Act of 1930. It allows a president to hit countries with tariffs of up to 50 per cent if the country 'is treating products of the United States disfavourably, compared to products of another foreign country,' said Peisch, a partner at Wiley Rein in Washington, D.C. Section 338 has never been used by a president before and Peisch said it might be difficult for the administration to make a case for it. Trump also might look to Section 301 of the Trade Act of 1974, which allows a president to take trade actions if an investigation finds a trading partner's policies are unreasonable and discriminatory. Trump used this law during his first administration to impose tariffs on some Chinese imports and European Union goods. This advertisement has not loaded yet, but your article continues below. But Section 301 requires country-by-country investigations of trade policy before a tariff can be imposed — investigations that could take weeks or months and would include a period for public comment. That certainly would slow down Trump's efforts to target the world with tariffs. If the president is looking for speed, Peisch said, he might try to use Section 122 of the Trade Act of 1974 — another law that has never before been used. Section 122 allows a president to implement tariffs of up to 15 per cent to address large and serious United States balance-of-payments deficits. But those duties can only stay in place for a maximum of 150 days before they need Congressional approval to continue. That reduces Trump's leverage if his goal is to pressure countries to sign trade deals — those countries could simply decide to wait the president out. Trump also has said tariffs will help pay down the deficit; the short-term Section 122 power is unlikely to work as a long-term revenue strategy. Ultimately, Peisch said, none of the replacement statutes could easily build Trump's universal tariff wall around the United States. 'Nothing is a great fit without a lot of work,' she said. 'So I think it's potentially going to be a challenge.' Olympics Sunshine Girls NHL Sunshine Girls Toronto & GTA
Toronto Star
07-06-2025
- Business
- Toronto Star
As his trade war faces legal pushback, Trump has other tariff tools he could deploy
WASHINGTON - U.S. President Donald Trump's tariffs are facing legal headwinds for the first time — but he has other tools he could deploy in his quest to realign global trade. A federal appeals court is still deciding whether there will be a stay on Trump's universal tariffs enacted through the International Emergency Economic Powers Act of 1977, usually referred to by the acronym IEEPA. The U.S. Court of International Trade ruled the duties were unlawful last month.
