"Emotional reactions can be overblown": what Wall Street is saying about repealing duties

The US Supreme Court overturned the trade duties imposed by US President Donald Trump in April. The US stock market reacted with growth, which only strengthened after Trump's comments at the press conference. However, analysts warn that the story with the duties is far from over and the overall effect may be temporary for the market, but some companies will still benefit.

- The Supreme Court's decision "did not come as a surprise to the markets," Nationwide chief market strategist Mark Hackett said in a Bloomberg statement. "While the immediate reaction of algorithmic trading is positive for globally oriented companies, retailers and automakers, caution should be maintained," the analyst said. - As we have learned since the pandemic, the initial, emotional reaction is often overblown and prone to sharp reversals. Most investors expect the administration to have an alternative strategy on duties."

- The court's ruling lowers the average effective U.S. duty rate from 13.6 percent to 6.5 percent - the lowest level since last March - and means about $170 billion in duties already collected could be subject to refunds to U.S. importers, Bloomberg Economics analysts Nicole Gorton-Caratelli and Chris Kennedy calculate. But they note that while the decision provides immediate relief for importers, it's unlikely to be long-term. The administration has signaled that it intends to replace many duties quickly, relying on other legal mechanisms, and they expect announcements of new fees under those programs could come soon.

- "The White House administration may find itself obligated to repay roughly $150 billion to $250 billion, but the process of settling the refunds itself is likely to take months and become a complicated legal and bureaucratic quagmire," Sarah Bianchi of Evercore ISI told Bloomberg.

- The court's decision creates more questions than certainty for retailers, says Telsey Advisory Group analyst Joe Feldman. According to him, the companies' attempts to recover the amounts already paid will take time, and the prices of goods, as a rule, do not decrease after the growth - except for raw materials like milk and eggs. In addition, the White House administration may introduce other duty options in the future. While operators may temporarily benefit from improved margins, they are unlikely to generate significant cash inflows or revise pricing policies, the analyst said. "The reality of what will happen in practice won't change that much," Feldman believes.

- "The duties actually worked as a hidden tax that helped finance [government] spending without formally raising taxes. Take them away and the [budget] deficit widens, borrowing rises, and historically such processes put pressure on the bond market and push yields up. That's good for corporate earnings, but not very encouraging for bonds," Bloomberg quoted Siebert Financial investment director Mark Malek as saying. - The market reaction is fairly obvious: duty-sensitive stocks are breathing a sigh of relief, Treasury securities are likely to increase, and policy uncertainty remains high. The duties may disappear today, but the incentive to bring them back is nowhere to be found."

- Michael Baker of D.A. Davidson also expects a backlash from the Trump administration. He believes the biggest positive impact may come from large importers with "relatively limited ability to pass on costs," such as Target, Best Buy and Dick's Sporting Goods. He also believes that companies such as Walmart, Costco, Home Depot and Lowe's are less affected by the duties due to their scale and "relatively low import share" of the business. Therefore, the positive effect of duty elimination will be less pronounced for them, Baker said.

- Retailers Target, Home Depot, Gap and Best Buy are preparing to release their financial statements. The big question now is whether these companies will factor the elimination of duties into their updated profit forecasts, notes GlobalData managing director Neil Saunders. "If they've already factored in very high costs because of the duties, there may actually be some upside potential," he said.

- The Supreme Court decision will create a moderate tailwind for retail sales already this year, but the effect will gradually fade by 2028, according to Emarketer chief analyst Zach Stambor. He expects the most notable positivity in the segments of computers and consumer electronics, clothing and footwear, as well as furniture and home goods, writes Bloomberg.

- "Forwarding and logistics companies, including Expeditors, DSV, Kuehne + Nagel, FedEx, DHL, and C.H. Robinson, stand to benefit from the Supreme Court's ruling against the Trump administration's tariffs, as the alternative duty imposition tools at the president's disposal are likely to create more uncertainty and further complicate supply chains," Bloomberg Intelligence analysts Lee Klaskow and Anchal Aich said. - In turn, this could increase demand, revenue and profits in the customs and logistics services industry beyond current expectations."

- The possible short-term positive effect on the economy will be offset by a prolonged period of uncertainty while the administration evaluates other options for imposing duties, says Michael Pearce of Oxford Economics. This uncertainty "could slightly hurt, but not derail" GDP growth in 2026, he says.

This article was AI-translated and verified by a human editor