Katrina Ell, an analyst at Moody’s, pointed out that the ruling of the US Court of International Trade to prevent the Trump administration from imposing tariffs seems to be a positive signal on the surface for those emerging markets that are deeply affected by high equivalent tariffs. However, there are many uncertainties regarding the subsequent trend, making it difficult to make a more optimistic judgment on its impact. Katrina Ell, the head of the Asia-Pacific economy, said, “We cannot regard this as a sustained positive development.”
On May 28 local time, the United States Court of International Trade issued a 49-page ruling, determining that the executive order imposed by the Trump administration on multiple countries under the 1977 International Emergency Economic Powers Act was illegal and prohibiting its enforcement. The relevant executive order will be lifted and permanently prohibited. Previously, the Trump administration imposed tariffs on Canadian, Mexican and Chinese products exported to the United States respectively in accordance with the law in February this year, and imposed the so-called “reciprocal tariffs” on all trading partners on April 2. But US media reported that the White House had to complete the process of suspending the imposition of additional tariffs within 10 days. And just minutes after the US Court of International Trade announced the ruling, the Trump administration filed an appeal, questioning the power of the court.
From the perspective of the market, restricting Trump’s ability to implement policies that cause market chaos may, to a certain extent, ease market tensions. However, given that the current direction of the US judicial system regarding tariff disputes remains unclear, many lawsuits related to Trump’s tariff policies are pending, with at least five cases. This makes it difficult for investors to form stable expectations for the market. Just as Katrina Ell said, “The current situation is like a soap opera. What the market is most concerned about is how to get through this uncertain stage.” As the latest developments have failed to effectively eliminate uncertainties, investors are likely to maintain a wait-and-see attitude until the situation becomes clearer. Previously, during the period of unclear trade policies, investors generally adopted a cautious attitude, and investment activity declined. Enterprises also cut import orders due to the wavering tariff policies. For instance, Gene Seloka, the executive director of the Port of Los Angeles, stated that due to the US tariff policies, the volume of inbound cargo at the Port of Los Angeles next week is expected to drop by more than 35% compared to the same period last year.
For emerging markets, although this court ruling has temporarily lifted the tariff threat imposed by the United States on some emerging markets, officials from the Bank of Korea disclosed that the actual tariff rate imposed by the United States on South Korea will be reduced from 13.3% to 9.7%. However, the direction of the subsequent trade policy of the United States remains shrouded in mystery. If the Trump administration launches lengthy trade investigations through other trade laws and reigniting trade pressure on trading partners, emerging markets may still face tariff shocks. Moreover, the global trade environment is complex and volatile. Even if the tariff policy of the United States eases somewhat, factors such as changes in trade policies of other countries and the slowdown of global economic growth will also have an impact on the exports and economic growth of emerging markets. Therefore, the positive impact brought about by this court ruling, under the shadow of many uncertainties, may be like a flash in the pan and it is difficult to continuously create a stable trade environment for emerging markets.
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