Episode summary
Global Trade in Flux: What’s Next After Tariff Ruling
Thoughts on the Market (Morgan Stanley)
· · 7 min · Hosts: Ariana Salvatore · Guests: Arunima Sinha
Summary
The Supreme Court’s ruling that the president could not use the International Emergency Economic Powers Act to impose broad-based tariffs forces the Trump administration to rebuild trade policy on a more durable legal basis. The host and Arunima Sinha said the near-term replacement plan centers on section 122 tariffs of 15% for 150 days, alongside new section 301 investigations to extend coverage later. Arunima Sinha said this likely trims the headline tariff rate from about 13% to about 11%, with 15% acting as a medium-term ceiling.
The discussion focused on where relief could show up first. Consumer goods were highlighted as a key pocket of potential tariff relief, with some categories seeing 1 to 4 percentage points lower tariff differentials in the near term and apparel and accessories potentially dropping 16 to 17 percentage points if additional sector tariffs do not arrive. The host noted that many Southeast Asian exporters may end up with lower tariff exposure than before, though the impact varies by export mix; Arunima Sinha pointed to Vietnam as more exposed to AIPA-linked tariffs and South Korea as more tied to unchanged section 232 tariffs.
On the macro outlook, Arunima Sinha said the second quarter should stay close to baseline, but later in the year there could be modest upside risks to demand, margins, labor demand, and goods disinflation if tariff pressures ease before new investigations are fully implemented. She also said a return to Liberation Day tariff rates looks unlikely in the near term, with full implementation potentially pushed into early 2027.
Key takeaways
- Arunima Sinha said the ruling likely lowers the headline tariff rate from about 13% to about 11% once the section 122 swap is reflected.
- The host and Arunima Sinha said 15% may be the likely ceiling for tariffs in the medium term, at least until the 150-day section 122 period expires.
- Consumer goods could see one of the biggest tariff resets, including a possible 16 to 17 percentage point drop in apparel and accessories if no new sector tariffs replace the current regime.
- Arunima Sinha said Southeast Asian countries may face lower tariff levels than before, but the impact depends heavily on export composition.
- For the macro outlook, Arunima Sinha said Q2 should stay near baseline, while late-2026 demand could get a modest lift from better margins and goods disinflation.
Notable quotes
“we think that it takes about a percentage point off of the headline tariff rate”
“I think we should view the 15% as probably a likely ceiling for these rates in the medium term”
“apparel and accessories could see something like a 16 to 17 percentage point tariff drop”
How the episode opens
Welcome to Thoughts on the Market. I'm Ariana Salvatore, head of public policy research. And I'm Arunima Sa on the US and global economics teams.
Today we'll be talking about the recent Supreme Court decision on tariffs, what it means for existing trade deals, and where trade policy is headed from here. It's Monday, February 23rd at 9:00 a.m. in New York.
On Friday, the Supreme Court ruled that the president could not use the International Emergency Economic Powers Act or AIPA to impose broad-based tariffs. The ruling didn't give a clear signal on what it could mean for potential refunds, but the Trump administration said it plans to replace the existing tariffs, which is something that we'd long expected, first leveraging section 122 to impose 15% tariffs for 150 days. The president is simultaneously going to launch a few new section 301 investigations to eventually replace those section 122 tariffs since they're only allowed to be in place temporarily.
So Arunima, let's start by breaking down some of this tariff math. What does this mean for the headline and effective rate given where we are now versus before? Before the decision, Ariana, we were at a headline tariff rate of about 13%.
What this decision does is that with the move especially to 15% for other countries, we think that it takes about a percentage point off of the headline tariff rate. So we would go to about 12% and then we have another uh percentage point coming off just because of the shifts in trade patterns. And so instead of a headline tariff rate of about 13%, we think that we're going to be at a headline tariff of just about 11%.
But that's really just related to the section 122s. And as you noted, this is only going to apply for the next 150 days.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- tariffs
- supreme court ruling
- global trade
- trade agreements
- economic outlook
Companies and tickers mentioned
- MS
- Morgan Stanley
Watch the episode
Watch “Global Trade in Flux: What’s Next After Tariff Ruling” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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