The Supreme Court issued a landmark 6–3 ruling against Donald Trump’s sweeping tariffs, marking a major judicial check on executive economic authority, but the policy battle is far from over. Within hours, the White House pivoted to new trade measures, proposing a 15% global tariff under Section 122, with the possibility of longer-term duties through further investigations. Joining the discussion, Carsten Brzeski, global head of macro at ING, explains that while countries like China may actually benefit from the shift, uncertainty is rising across European Union, where officials in Germany fear higher sector-specific tariffs could threaten export growth. He also notes that potential refunds tied to the ruling could total up to $170 billion, complicating fiscal dynamics for the United States, while warning that targeted tariffs on sectors like steel, autos, or pharmaceuticals could push inflation above 3% and limit rate-cut flexibility for the Federal Reserve. Looking ahead to anticipated talks between Trump and Xi Jinping, Brzeski cautions that with global powers increasingly willing to push back, the risk of a broader trade escalation may be higher now than at any point in the past year.
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The Supreme Court officially drawing a line in the sand, ruling 6 to 3 that Trump's sweeping Liberation Day tariffs exceeded his executive authority.
What is the first major judicial check on this administration's economic power.
And while the legal scaffolding has come down, the trade war is far from over.
Within hours, the White House pivoted into a new toolkit, invoking Section 122 for a 15% global tariff.
Now Trump does say duties would then shift to Section 301.
Which enables longer term levies but requires month-long investigations before imposition.
While joining us to break all of this down, including the macro and the global reaction, is Carsten Brzeski, global head of macro at ING.
Carsten, thank you so much for joining me.
So first and foremost, the Supreme Court struck down the IEA authority.
So walk us through this 15% global levy.
And since you're joining us from Germany today, tell us about the European reaction to these tariffs.
Yeah, I think like, like you said, a 15% now on, on new tariffs as Section 122 from the 1974 Trade Act, uh, and this is across the board to all global trading partners of the United States, which means in, in very short that uh, countries like China and other Asian countries are actually benefiting because for them these 15% are lower than the.
IEPA tariffs, while for other countries like the European Union, the IEPA tariff is more or less now replaced by this new tariff and hardly anything has changed.
Reaction in Europe, and in Germany has clearly been new uncertainty.
Because the Europeans are still struggling now whether or not they should commit to this bilateral deal that was made last summer between the United States and the European Union.
We just heard this morning that the European Parliament apparently wants to freeze their approval.
Of this trade deal, which means there wouldn't be a deal at the same time we have new fears coming up, especially in German export industry, of even higher tariffs that could clearly undermine this tentative, gentle, soft, technical upswing we're currently witnessing in Germany. and Carsten on this Monday morning there is still plenty of confusion on both sides of the Atlantic here in terms of what the implications are, but the ruling does leave the door open for billions in terms of refunds but does also require lawsuits.
So what is realistic for the potential liquidity injection for corporate entities?
Well, like you rightly said, I think the refunds would amount to $150 to $170 billion US dollars, uh, which would bring an enormous hole in the federal budget, um, in the, in the United States, um, and I think the question now will also be, um, well, if it is really replaced by this new 15%.
Tariffs than overall, the effective tariff rate of the United States would be almost unchanged from what it was last year, uh, sorry, last week even.
And um if, if this remains the case, then also the the hole in the federal budget should close again and actually we would be, well we Stood last week.
The only thing is more uncertainty as these new tariffs under Section 122 would expire after 150 days, and it's completely unclear whether then the US government would go for another 150 days or whether these new tariffs would simply disappear. and you mentioned the key word there and that is budget, not just for the US government but also for American consumers.
So I do want to get your take on Section 301 as well as 232 in terms of investigations.
Do you expect this move away from the broad brush tariffs toward more say so-called surgical sectoral strikes on whether we're talking about autos or chemicals to be inflationary to the American consumer.
Yes, indeed, if we were to see the government continuing down this road, namely more sectoral tariffs and then clearly higher tariffs, think about steel, 50%, think about pharmaceuticals, automotives, between 15 to 25%.
So if the government was to investigate this in more detail, would come up with broader.
On sectors or even higher tariffs on sectors, clearly this would be even more inflationary for the US economy, for US consumers, and would probably push up US inflation to above 3% already this year, bringing another difficulty for the Federal Reserve because this means the higher this inflationary pressure from tariffs will be, the lower the likelihood for rate cuts is.
Yes, that is something that we're closely monitoring in terms of economic data.
But finally, before I let you go, I do want to ask you about trading partner leverage.
Now as we head into a new trading month next week, we are awaiting that meeting between Trump and Xi Jinping.
So what are your expectations for that gathering at the end of next month?
My expectations are that very little will come out of these negotiations, but more generally speaking, Remy, I'm a bit concerned that the risk of a full-fledged trade escalation is currently much higher than it was last year because we're seeing that not only the Chinese but also the Europeans are more and more.
Flexing their economic muscles, meaning that they would not simply accept any terms dictated by the US government and if we were in a world in which the Chinese but also the Europeans tried to play hardball vis a vis the US, um, the US government, I think the risk of a really trade escalation is clearly high.
Well, Carsten, we will have to leave it there for today, but thank you so much for joining us as we kick off the trading week and we appreciate all of your insights.