Tariffs – Drama
Last Thursday, a US trade court struck down Trump’s “Liberation Day” tariffs, ruling that they exceeded the limits of presidential power under the International Emergency Economic Powers Act (IEEPA). The case is now heading for appeal and is ultimately expected to reach the Supreme Court. A final decision is anticipated by early July. This ruling weakens the administration’s leverage in trade negotiations. However, tariffs are far from dead: the administration still has alternative tools at its disposal. The message is clear – tariffs are still in play, but the rules of engagement are shifting.
ECB – Another Cut Coming
The ECB meets this Thursday and is expected to cut rates by 25 basis points, bringing the deposit rate down to 2.00%. Beyond this meeting, however, the outlook becomes foggier. Markets are pricing in a little more than one additional cut for 2025, most likely in September, but there is considerable uncertainty over the timing. Much will depend on external developments – particularly tariffs. The ECB must balance the need to support growth with the risk of a resurgence in inflation. If tariffs escalate to 50%, the ECB may be forced to respond more aggressively. The stage is set, and the pressure is mounting.
Algebris Investments’ Global Credit Team
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