GM. This is Milk Road, the macro newsletter that’s here to explain what it really means when you hear “tariffs are back.”

Here’s what we got for you today:

• ✍️ What exactly happened with Trump’s tariffs

• 🎙️ The Milk Road Show: The US Treasury's Next Move Will Inflate Everything w/ Craig Shapiro

• 🍪 The US growth outlook has hit the highest level since 2021

WHAT EXACTLY HAPPENED WITH TRUMP’S TARIFFS

It was a crazy week in the world of Trump tariffs last week.

First, it looked like a large chunk of the global tariff plans had been halted.

A court ruled that many of the Trump tariffs were “unconstitutional”.

But then, less than 24 hours later, an appeal temporarily postponed the court ruling.

The tariff merry-go-round continues.

So where do we stand now?

Has anything actually changed?

What might happen next?

And what does it all mean for risk assets like stocks and Bitcoin?

Let’s take a look…

So, what exactly happened last week?

The US Court of International Trade ruled on May 28 that some of the global tariffs imposed by President Donald Trump since taking office were “issued illegally”.

This didn’t affect all of the Trump tariffs - just the so-called reciprocal tariffs put in place using the International Emergency Economic Power Act (IEEPA).

However, the Trump team immediately appealed the court ruling.

And on May 29, the Federal Court of Appeals issued an “administrative stay”.

This means tariffs can temporarily remain in place as the appeal process begins.

So, where do we stand now?

Tariffs are Trump’s self-proclaimed “favorite word in the dictionary”.

It’s unlikely that tariffs are going away due to this court ruling.

We now look set for a lengthy appeal process, the first part of which is likely to conclude in a few weeks.

But this process may escalate all the way to the highest court in the land, the Supreme Court, which will push things out a lot further.

While this long and winding appeal process progresses, it’s likely that all tariffs will remain in place (as long as the Trump team still wants them).

So, what might happen next?

While the appeal process is ongoing, there’s still a lot of other alternative options available to the Trump administration to maintain tariffs.

An appeal defeat is unlikely to derail the tariff train - if the Trump team still wants to press ahead.

There are a number of “sections” that could be used as another way to impose tariffs.

(This long list of sections includes section 122, section 201, section 232, section 301 and section 338)

These are different legal mechanisms to accomplish much of what has been ruled unconstitutional under IEEPA. 

So, is this court ruling really a big deal?

Despite the court ruling, all tariffs are likely to remain in place for some time.

According to Goldman Sachs’ chief political economist Alec Phillips:

“This ruling represents a setback for the administration's tariff plans and increases uncertainty but might not change the final outcome for most major US trading partners.”

However, we will now learn just how committed the Trump team is to forging ahead with tariffs.

If Trump was looking for some kind of “off-ramp”, he’s been given it.

He could theoretically blame the court and use the ruling as an excuse to pull back on tariffs.

But this seems unlikely, given comments from members of the Trump team in recent days.

Secretary of Commerce Howard Lutnick said:

"Rest assured, tariffs are not going away... Congress has given this authority to the President, and he's going to use it."

There is also another potential knock-on effect from the court ruling.

The extra uncertainty it brings might weaken negotiating leverage for the Trump team.

And alter the willingness of other nations to negotiate.

It may be the case that China, the EU and others won’t be in as much of a rush to get on with trade talks while it remains unclear whether Trump is on legally shaky ground.

Here is one interesting headline that dropped on Monday:

Japan PM Ishiba: “We have no intention to compromise on US tariffs.”

The bottom line

Ultimately, not a whole lot changed on the tariff front last week.

Tariffs are likely to remain in place.

But things are still generally de-escalating from where we were in early April.

This can be seen through a “Trade War Intensity” measure from Augur Infinity.

The majority of market participants are now expecting the “effective tariff rate” to eventually end up at around 10% to 15% - and this has now been digested by the market and priced in.

So, it’s likely that ongoing tariff headlines will have progressively less impact on risk asset prices - unless things start escalating significantly again.

We are also seeing tariff revenues start to make a material difference to the US Government’s finances.

Customs revenue was up more than $20bn in May.

At current tariff rates, the full effect looks to be roughly $30bn per month, or $360bn annually - about 1.2-1.5% of GDP.

Port of Los Angeles shipping volumes have also been largely unaffected amid the tariff chaos, relative to previous years.

So, last week we saw lots of news headlines - but really, under the surface, little has changed.

This can be seen through muted reactions in asset markets.

However, there’s one big thing to remember - we are one Trump Truth Social post away from everything changing.

The “headline risk” is real.

And Trump is now being goaded by the press - with “the TACO trade” (Trump Always Chickens Out) becoming a new narrative.

Maybe spurred on by the TACO talk, Trump decided to increase steel tariffs from 25% to 50% on Friday.

So stay on your toes!

That’s it for this edition - catch you for the next one!

IS TRUMP GOING TO SOLVE THE US DEBT PROBLEM?

Remember when we wrote out about The Big Beautiful Bill?

Well, Craig Shapiro joined The Milk Road Show to give his take on what this bill could mean for stocks and risk assets.

He also shares his two cents on:

• The chances of Inflation spiralling out again?

• How can the government handle rising yields?

• What he’s doing with his portfolio right now

Click below to watch the full episode. 👇

YouTube | Spotify | Apple Podcasts

BITE-SIZED COOKIES FOR THE ROAD 🍪

The US growth outlook has hit the highest level since 2021. But there’s a catch: the number is being heavily influenced by tariff-driven swings in imports and exports

China’s manufacturing PMI has plunged to 48.3. This is a clear sign that tariffs may be taking a toll on the country’s manufacturing sector.

Senate Republicans want to make Trump’s deficit widening “Big Beautiful Bill” even bigger. There’s likely to be many more weeks of wrangling over the new bill before it passes.

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