UBS: Repeal of Trump Tariffs Could Put Pressure on US Fiscal Situation, Creating Opportunity for Fed Rate Cut
BlockBeats News, November 6th. A UBS Group analysis pointed out that if the US Supreme Court rules that Trump's tariff policy is illegal, it is expected to force the US government to refund approximately $140 billion in tariffs to importers, equivalent to 7.9% of the estimated federal budget deficit for fiscal year 2025. If the US government loses the case, the substantial tax refund will immediately trigger a fiscal impact and may lead to the formation of a structurally low-tariff trade environment.
If trading partners do not retaliate, this environment will eventually benefit the US economy and stock market. UBS estimates that the government is likely to use legal tools such as Section 201 and Section 301 of the Trade Act of 1974 to rebuild tariff barriers, but this process will take several quarters and reduce trade policy flexibility. Although the refunds will bring unexpected windfalls to import companies, the impact on the overall market may be limited as tariff costs have not significantly depressed S&P 500 earnings expectations.
UBS believes that the ruling may ultimately lower the overall effective tariff rate, increase household purchasing power, alleviate inflationary pressure, and provide the Fed with more room for interest rate cuts. As long as trading partners avoid escalating retaliatory measures, this will generally be welcomed by stock market investors. (FX678)
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