The debate over US tariffs has dominated market conversations for more than a year. But the recent Supreme Court ruling declaring President Trump’s previous tariff actions illegal has changed the landscape. In response, the administration introduced a temporary 10% blanket tariff, with plans to raise it further. However, after a brief wobble on Monday, markets remain calm with global equities still up around 1% over the past week.
Markets appear largely unfazed, why?
First, the newly announced tariffs can only remain in place for 150 days, limiting their long-term significance. The 10% rate is also slightly below the pre-ruling US effective tariff rate of roughly 13%, according to Oxford Economics, making the actual change seem fairly minimal compared to last year’s so called “Liberation Day”.
Second, markets have grown accustomed to changes in tariff policy. Trump frequently uses tariff threats as a negotiation tactic rather than a fixed policy position. Reacting dramatically to every new announcement has proven costly in the past, so investors are increasingly placing emphasis on durable, high-conviction opportunities that can withstand shifting political winds.
Lastly, by requiring Congressional approval for any future tariff changes, markets may enjoy more predictability and fewer surprise trade policy swings.
Who benefits from the new tariff regime?
Ironically, some of the biggest winners are countries that were previously most affected by US tariff policy. China, for instance, could see tariff rates fall by around 7% with the new 10% blanket tariff, according to Global Trade Alert, though its overall tariff burden remains above the new baseline due to other tariffs the US has in place which are not a result of Trump’s recent use of emergency powers.
Several other emerging market countries, including Taiwan and Vietnam, may also experience tariff reductions of 1–3%. For export-driven economies with strong positions in areas like AI and semiconductors, this shift could meaningfully support equity markets. India and Brazil could also benefit from large declines in tariff rates.
Where the pain lands
Surprisingly, traditional US allies face higher costs. The UK’s tariff rate rises by around 2%, squeezing businesses already contending with elevated input prices. Elsewhere, the EU, which is heavily dependent on goods trade, may also feel the strain, especially if existing agreements with the US are deemed void, potentially triggering retaliatory measures and higher prices for consumers on both sides of the Atlantic.
Economic ripple effects
Tariffs are effectively a tax on imports and typically produce one-off increases in goods prices as firms either absorb costs through lower margins or pass them on to consumers. However, the temporary nature of these measures, and the relatively small change in effective rates, means little additional inflationary pressure is expected.
Broader inflation drivers point in the same direction: services and shelter inflation should continue to ease, supporting expectations for moderating price growth through the year. Meanwhile, the US economy, powered primarily by consumption, fiscal stimulus and investment (rather than trade) is proving relatively insensitive to tariff-related shocks. As such, tariffs are not expected to be a meaningful drag on near-term US growth or inflation.
There could, however, be a fiscal wrinkle. The government may be required to refund approximately $134 billion in tariff revenues collected under the now-invalidated measures. This could complicate funding plans for Trump’s “Big Beautiful Bill” and constrain fiscal space for promised tax cuts. In turn, this could potentially reduce demand and U.S. corporate earnings, and potentially weigh on the dollar, Treasury yields and broader market sentiment if fiscal sustainability concerns take hold.
Longer-term market considerations
While markets have absorbed the immediate shock, this episode underscores growing concerns around US policy credibility. Trump’s individualised approach to policy has clearly increased the risks of equity volatility, higher Treasury yields tied to fiscal sustainability questions, and renewed weakness in the US dollar. Confidence in stable US policymaking is eroding, raising the likelihood of episodic volatility through and beyond this year. AJ Bell’s investment team will continue monitoring these dynamics closely.
Gold rallies - but not a reliable hedge
Gold prices have climbed 5.4% over the past week as investors seek alternatives to the US dollar and Treasuries. But despite its recent strength, we do not view gold as an effective defensive asset. Its high volatility and lack of income make it an unreliable hedge against the higher inflation that a new tariff regime may bring. We continue to favour short duration and inflation-linked bonds for investors seeking resilience.
Overall, the latest tariff moves don’t appear to be an economic turning point. With impacts limited and measures temporary, markets remain anchored by fundamentals which remain stable for now. While US policy uncertainty may create bouts of volatility, long‑term opportunities, particularly in selected global and emerging markets continue to provide support for diversified investors.
Jeremy Ocansey: Senior Investments Strategist
Jeremy joined the AJ Bell Investment team in October 2025 as a senior investment strategist. He began his investment career in 2018 at a global asset manager. He then joined a large wealth manager on...
