his commentary is provided by Elev8, an international broker, regarding recent developments in trade tariffs.
What changed in U.S. tariff policy?
On 20 February, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were unlawful. Chief Justice John Roberts stated that the 1977 law does not authorize the president to impose taxes or tariffs, as that authority belongs to Congress.
Within hours, however, the administration shifted course. President Trump invoked Section 122 of the Trade Act of 1974, introducing a temporary 10% tariff on imports effective 24 February, with the option to raise it to 15%, the legal ceiling under that provision.
The move largely restores the effective U.S. tariff rate to roughly pre-ruling levels near 12%. The immediate disruption to trade flows is therefore limited. But Section 122 lasts only 150 days, expiring on 24 July 2026, and that deadline now looms large for investors.
Why did gold jump?
Policy uncertainty is fuel for safe-haven demand. Gold rose more than 2% at the start of the week, reaching a three-week high near $5,257 per ounce.
The court decision briefly created a policy vacuum, followed by a rapid executive pivot. That sequence unsettled markets. Investors are weighing not just tariffs, but broader geopolitical risks, including U.S.–Iran tensions and global trade negotiations.
Investor Takeaway
With major markets like China returning from the Lunar New Year holiday, liquidity and positioning may amplify price swings in the coming weeks.
What about the U.S. dollar?
Despite the administration’s swift response, the dollar index (DXY) softened slightly and is hovering near 97.8. The broader short-term trend remains intact, but conviction is low.
Markets are juggling several variables: potential tariff refund litigation, stalled trade frameworks with partners such as the EU and Vietnam, and economic drag from the recent government shutdown.
The Federal Reserve’s next move also matters. If inflation concerns dominate, the dollar could stabilize. If growth slows more sharply, the currency may struggle. For now, traders appear to expect range-bound movement between 96.5 and 98.6.
How are equities responding?
Equity markets reacted cautiously rather than dramatically. The S&P 500 slipped about 1%, a modest move relative to recent volatility.
Investors are balancing two competing forces: the possibility that legal limits curb aggressive tariff escalation, and the risk that new legal paths—such as Sections 232 or 301—introduce fresh trade friction.
The next 150 days are likely to be pivotal. Section 122 functions as a stopgap, not a permanent tool. If alternative mechanisms face court challenges, markets could see renewed turbulence.
Investor Takeaway
For now, the practical impact of the ruling is contained. But legal uncertainty lingers, and refund litigation could stretch on for months or years. Markets are likely to remain sensitive to headlines until a more durable trade framework emerges.
