The Court of Market Opinion
The Weekend Edition is pulled from the daily Stansberry Digest.
The next phase of the tariff fight...
Nearly five months ago, a group of small U.S. businesses filed a lawsuit against President Donald Trump's "reciprocal" tariffs.
Last Friday, a federal appeals court ruled 7-4 that Trump's "Liberation Day" tariffs (and similar plans that have come up in trade deals since) are illegal.
In short, the appeal court reaffirmed the Court of International Trade's May ruling that the president doesn't have the authority to use the International Emergency Economic Powers Act of 1977 to enact tariffs. The court said...
The core Congressional power to impose taxes such as tariffs is vested exclusively in the legislative branch by the Constitution.
That means Congress has the power to impose tariffs, not the president.
Now, this isn't the end of the road...
The appeals court is allowing these tariffs to remain in place through October 14. So the Trump administration has time to take the case to the Supreme Court. But right now, the outcome is leaning the plaintiffs' way.
This lawsuit – V.O.S. Selections vs. Trump – was first filed in mid-April, shortly after Liberation Day. As I wrote in the April 15 Digest...
A wine importer and distributor in New York [V.O.S. Selections]... a sportfishing-gear business in Pennsylvania... a pipe company in Utah... and a couple other small U.S. businesses filed a lawsuit against President Donald Trump yesterday.
They're seeking to block Trump's new tariffs on foreign imports, alleging they're illegal because Congress doesn't grant a president the power to levy tariffs based on trade deficits with other countries on the basis of a national "emergency."
While I'm not a lawyer, the case seemed destined for the Supreme Court. We suspected it would take some time to play out. But as far as the near-term market impact, the writing was on the wall...
When you pair this suit with what we've heard recently about tariff "flexibility"... exemptions... and expected trade deals with more than 10 foreign partners to be announced in the future, it sure sounds like the tariff war is losing its teeth.
I could be wrong. But all of this could mean more "less bad" news for the market.
The idea that reciprocal tariffs might be deemed illegal certainly hasn't hurt U.S. stocks. Both the S&P 500 Index and tech-heavy Nasdaq Composite Index rallied from their mid-April lows to hit new all-time highs.
But now there's something else to think about...
It remains to be seen how or when the Supreme Court might rule on this case. But it looks like investors are preparing for the White House to lose this fight.
Longer-term bond yields climbed on the news to begin the week (though they didn't eclipse their spring highs).
Gold futures have steadily soared since last weekend, too... with the price of the metal reaching new all-time highs above $3,600 per ounce, breaking out of an appealing technical setup in the process.
I always hesitate attributing big asset price moves to one thing. But it's hard to ignore the headlines suggesting that the U.S. government may need to refund the billions of dollars in tariffs it has collected over the past several months.
As of July, the government took in $159 billion in tariff revenue this year – double what it was at this point last year. In a recent note on the U.S. debt rating, S&P Global Ratings – one of the "Big Three" credit-rating agencies – said that tariff revenue is offsetting the fiscal risk from lower tax revenue and increased spending in the "big, beautiful bill."
If the government ends up having to return that revenue, Uncle Sam would see a bigger budget deficit... while the Federal Reserve may lower interest rates.
So if you want to bet on one thing, the continued devaluation of the U.S. dollar is a good start. Meanwhile, a "hard asset" like gold will remain an attractive asset to hold.
That said, there are other ways for the Trump administration to collect new tariffs via existing trade acts that wouldn't be challenged in court...
On Tuesday, Treasury Secretary Scott Bessent said the White House has a backup plan. I'd be shocked if they didn't use it. But it's hard to say exactly what Plan B will look like. And those next steps would take time.
In short, Wall Street has been contesting tariffs in their current form for months. Last week's ruling doesn't change that. But the development added a bit of volatility to the market.
This is just part of the story...
Over the past several decades, we've seen an endless parade of politicians and government officials take action to manipulate fiat currencies.
It happens for a variety of circumstances and for various reasons. And it always ends the same way – the value of that currency erodes.
So if you want to protect and grow your wealth, you must own exceptional assets that can help you beat inflation... like shares of high-quality businesses or gold.
And it's critical to think for yourself and listen to folks who aren't afraid to question mainstream narratives.
All the best,
Corey McLaughlin
Editor's note: President Trump may be the biggest gold bug in U.S. history, even touting a return to the gold standard. Since he first took office, gold prices have nearly tripled. And with Washington now entering what Trump calls the "golden age of America," prices could soon blast past $4,000... even $5,000 an ounce. The smartest investors aren't waiting – because a historic new bull market in gold is only just beginning.