The tariff threats we have seen from Trump in the past 12 months are now losing their effectiveness. Large trade partners are able to shift their exports to non-US destinations & they are also more ready to use counter trade measures unlike last year. With US equities being extremely sensitive to tariff issues, Trump is fully aware that he can’t play the tariff game at least till the mid term elections. Good economic outcomes are most likely to enhance Republican political prospects & We doubt that tariffs will contribute to perceptions of economic wellbeing. For Trump winning the majorities in House & Senate is primary to any other objective this year. He wants to leave a legacy of the strongest Republican president ever when he leaves in 2028. We believe this goal takes precedence over all his other ideological economic theories for at least the next 10 months. With the Supreme court ruling on the legality of IEEPA tariffs being delayed to 20th Feb, Trump has a window to prepare for alternate tariff measures. But even in all such alternate routes the risks nevertheless lean toward lower tariff rates, as an across-the-board replacement under Sec. 122 would be capped at 15%, while country specific rates under Sec. 301 would require investigations which could be impractical to conduct for all trading partners.
