Tariff risk returns to markets

Tariff risk is back in stock prices, and investors are treating new trade moves as immediate hits to earnings, costs and buying schedules. (budgetlab.yale.edu) The White House imposed a 10% import surcharge for 150 days on February 20, with the duty taking effect on February 24 under Section 122 of the Trade Act of 1974. The U.S. Trade Representative then opened new Section 301 investigations on March 11 into manufacturing practices and on March 12 into forced-labor enforcement across 60 economies. (whitehouse.gov; ustr.gov; ustr.gov) The Supreme Court added another jolt on February 20, ruling in *Learning Resources v. Trump* that the International Emergency Economic Powers Act does not authorize tariffs. That forced the administration to shift from the struck-down emergency tariffs to other trade authorities within hours. (supremecourt.gov; whitehouse.gov) Markets are repricing that sequence because tariff policy now changes on court rulings, proclamations and investigations, not just on annual sourcing plans. J.P. Morgan said the latest announcements increased market volatility and left importers juggling multiple tariff schedules even if the aggregate macro effect was not large enough to change its base outlook. (jpmorgan.com) The tariff math is large enough to matter for valuations. The Budget Lab at Yale estimated on April 2 that the U.S. effective tariff rate stood at 11.0%, the highest since 1943 excluding 2025, and said a temporary Section 122 schedule that expires after 150 days would still leave the rate at 8.2%, the highest since 1946. (budgetlab.yale.edu) That same Yale estimate put the eventual price-level effect at 0.5% to 0.6% if the Section 122 tariffs expire on schedule, equal to about $650 to $780 for the average household. If the surcharge is made permanent, Yale estimated a 0.8% to 1.0% price effect and a household loss of about $1,130 to $1,340. (budgetlab.yale.edu) Businesses do not wait for final tariff rates before reacting. A Federal Reserve Bank of Boston paper found tariff uncertainty rose sharply in April 2025, and said importers linked that uncertainty to investment, hiring, prices, costs, revenues and profit margins; it also found U.S. goods imports from China fell in May 2025 to about half their value at the start of that year after a 145-percentage-point tariff increase. (bostonfed.org) The administration says the new surcharge is meant to address balance-of-payments problems and push production back into the United States. Yale’s longer-run model shows the tradeoff behind that argument: manufacturing output rises 0.7%, but construction falls 2.0% and mining declines 0.8%. (whitehouse.gov; budgetlab.yale.edu) Tariff risk is also showing up in cash flow and inventory decisions, not just economist models. Yale estimated the 2025 tariffs had raised $214.7 billion in inflation-adjusted customs revenue above the 2022-2024 average by February 2026, while warning that about $165 billion in unlawfully collected duties may have to be refunded after the Supreme Court ruling. (budgetlab.yale.edu; supremecourt.gov) The next test is not whether tariffs exist, but whether investors believe the schedule in force this month will still be the schedule in force by late summer. Until that answer firms up, tariff headlines are likely to keep moving share prices, import orders and earnings assumptions at the same time. (jpmorgan.com; budgetlab.yale.edu)