What a mess.
The Supreme Court voted 6–3 to block President Trump’s use of the International Emergency Economic Powers Act to impose his “Liberation Day” tariffs.
Chief Justice John Roberts wrote that the Constitution grants tariff authority to Congress alone. Justices Thomas, Alito, and Kavanaugh dissented.
The case centered on Trump’s 10% global tariff and the higher reciprocal tariffs layered on select trading partners. Oral arguments were heard in November. The Court concluded that IEEPA did not authorize such broad tariff power.
A concurrent research paper from the New York Fed concluded that American consumers bear most of the tariff cost.
The markets rallied, briefly. Traders are looking for any reason to avoid scrutinizing the AI disruption trade. More on that trade below.
Importers seeking reimbursement on tariffs face an enormous hassle. Their efforts will likely clog up years of court time and make a bunch of beltway lawyers rich. (Source: The Kobeissi Letter).
Not wasting a juicy opportunity to grandstand, minority leaders Chuck Schumer (D NY) and Hakeem Jeffries (D, NY) claimed “victory” for the “Orange Man Bad!” crowd.
As per usual, the statements did not indicate that either snollygoster has any clue how the economy actually works.
Never fear.
The Democrats will try to ride the Supreme Court ruling to a series of victories in the November midterms and regain control of the House. Can you imagine? After Zohran Mamdani won the NYC mayoral election, promising free buses and childcare, he discovered the only way to balance the city’s books was to raise taxes on middle-class property owners.
Duh.
We would love to see at least one reporter demonstrate their own command of economics and ask these knuckleheads what their plan is to level reciprocal trade relations, increase production, secure supply chains, reduce taxes, or encourage new employment in the United States.
Just one.
In Any Case, Not So Fast…
The President’s tariff authority does not simply disappear.
Capitol Gains Trader, Andrew Zatlin, observed this morning that the White House retains alternative statutory routes.
Trump’s “Plan B” focuses on utilizing existing trade statutes — specifically Section 122 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962 — to implement a temporary 10% duty and other targeted tariffs.
This backup plan allows the administration to continue levying taxes on imports while avoiding the legal pitfalls of the previously declared national emergency.
Key Components of Trump’s Tariff Plan B:
Temporary 10% Duty (Section 122): The administration may quickly implement a 10% tax on imports to maintain leverage, justified under the Trade Act of 1974, which allows for tariffs in response to international payment issues or large trade deficits.
Targeted Sector Tariffs (Section 232): Continued use of Section 232 to impose tariffs on goods deemed a threat to national security, such as steel, aluminum, automobiles, semiconductors, and pharmaceuticals.
Alternative Legal Authorities (Section 301/338): Utilizing Section 301 (often used in previous trade actions) or potentially the never-before-used Section 338 of the Tariff Act of 1930, which allows up to 50% tariffs on countries that discriminate against U.S. commerce.
The goal of this Plan B is to “backfill” the revenue and leverage lost from the overturned 2025 emergency measures, ensuring, as argued by Kevin Hassett, that broad tariffs remain in place.
The president is going to need them when he pays a visit to Chinese President Xi Jinping in Beijing on March 31 – April 2, 2026, fittingly a year to the date after “Liberation Day.”
Fifteen Days on the Clock
Prediction markets price the odds of a U.S. strike on Iran above 70% by June and above 55% by next month.
President Trump said Tehran has “maximum” 15 days to reach a nuclear deal. Two carrier strike groups operate in the region. Fifty additional fighter jets have repositioned.
Talks in Switzerland continue without tangible progress. Iran partially closed the Strait of Hormuz during military drills.
“These predictions are being made by people who are ignorant of what is truly going on inside the Trump White House,” Scott Ritter wrote this morning, “what pressures have been placed on the military regarding operational timelines by the logistical sustainability burden of moving massive quantities of military resources in to the Middle East region, or the domestic political calculations being made about the President’s chances in the mid-terms elections, and what the impact of a war with Iran (positive or negative) would have on the outcome of these critical electoral contests.”
Ritter says his own assessment puts the probability of conflict between the US and Iran at close to 100%.
You may recall Mr. Ritter rose to fame as the investigator in charge of finding Weapons of Mass Destruction (WMD) before the US launched its “shock and awe” campaign against Saddam Hussein’s Iraq on March 9-13, 2003.
“Over the course of the decade that followed,” warns Ritter of a likewise preemptive attack on Iran, “I was able to bear witness to the black hole that is national security decision making as it pertained to Iraq, and discovered that it operated without any moral compass, but rather to appease the whim of power hungry people who traded human life for political influence.”
Always the war-monger, Senator Lindsey Graham urged Gulf leaders to “seize the moment.” Financial Times reporting suggests Iranian officials view prolonged conflict as a lever for domestic cohesion and U.S. war fatigue.
While the military readies for action, President Trump pledged $10 billion toward a Board of Peace initiative for Gaza reconstruction, with Gulf states contributing $7 billion. Plans include 100,000 homes. The estimated total rebuilding cost stands near $70 billion.
The AI Race Runs on Power Lines
In New Delhi this week, leaders debated U.S. and Chinese positioning in artificial intelligence. Jared Cohen of Goldman Sachs argued that framing the contest as a single race obscures the landscape.
The U.S. leads in chips, frontier models, and sales. Chinese firms are expected to invest roughly $70 billion in AI next year — far below projected U.S. outlays.
Energy constraints will shape the next stage. Data centers demand enormous power. Transmission bottlenecks delay projects. Investors explore Gulf states for infrastructure buildouts.
China retains dominance in critical minerals. Export restrictions limit chip flows. Memory and cloud infrastructure emerge as new chokepoints.
Artificial general intelligence drives Silicon Valley ambition. Diffusion and industrial application dominate Beijing’s priorities.
Supply chains remain intertwined. The Supreme Court ruling on tariffs will further “the race”.
In the meantime, we’ll be trading the rise in energy demand and diminishing supplies of critical minerals. Over at the Grey Swan Trading Fraternity, we’ve added positions in the oil and natural gas space – with a strong domestic player, free from the challenges of international commodity investments right now.
A Narrative Edge on Trading Desks
Goldman Sachs’ Ryan Hammond warned the bank’s traders this morning that AI disruption risk behind recent sell-offs in software, publishing, and legal services will continue.
Retail investors, however, haven’t gotten the meme. They have yet to question whether industry-specific AI applications compress margins and employment.
As large technology firms continue expanding “capex” spending plans, Goldman is urging its team to seek evidence that spending translates into “durable revenue.” (Source: Goldman Sachs.)
After two years of AI lifting index returns, “big capital” is only now differentiating between builders, adopters, and the disrupted.
Equal-weight indexes are currently outperforming cap-weighted measures. As we pointed out yesterday, non-U.S. markets and consumer cyclicals are attracting “rotation,” meaning as an individual investor, you’d be wise to start asking how these big AI buildouts are going to pay off in the long run.
Through it All Gold Awaits…
A chart circulating this morning on X compares global equity market capitalization with the market value of gold:
Gold does not file earnings guidance. It sits on central bank balance sheets and private vault shelves.
The above ratio sits far from parity. A reversion would require material repricing of one side or the other. We’ll likely get both… stocks down, gold up.
Enjoy your weekend,
~ Addison
P.S. Yesterday on Grey Swan Live! did a deep dive into stocks that are several steps removed from bear market trends on the Wall Street indexes. Matt Milner, Private Market Profits, gave us a tour of – and a strategy for – investing in the massive private capital markets usually reserved for well-connected investors: the pre-IPO space.
Elong Musk’s SpaceX and Palmer Luckey’s Anduril have grabbed headlines this year as their unicorn giants approach their very public launch into the AI stock market.
Matt Milner created a way to get access to these companies before they go public.
