What’s the Tariff Endgame?

by Ed Mills of Raymond James, 4/10/25

This commentary was originally posted on April 6th.

In response to the April 2 “reciprocal” tariff announcement, Managing Director, Washington Policy Analyst Ed Mills and team provide in-depth analysis of potential paths forward.

The April 2 “reciprocal” tariff announcement has introduced a considerable amount of uncertainty and confusion about the path ahead and the end game for President Trump. While the path ahead has more questions than answers at this point, in this note we outline what we view as the options for the path ahead, potential endgames for the Trump administration, and discuss the bull case for the market from a policy perspective that could emerge in coming weeks.

Possible paths forward

Mills sees three potential paths forward for tariffs:

1. Trump starts cutting deals and tariffs are reduced

2. Courts or Congress block the tariffs; and/or

3. Trump stays the course, and this is a historic realignment of global trade.

The market is hoping for a combination of 1 and 2, with growing concerns about the possibility and uncertainty of 3. Trump has sole authority over paths 1 and 3, making this harder to gauge.

For path 2, a court challenge should be closely watched. Trade contacts highlight that Congress passed The Trade Act of 1974 following the use of emergency authority by President Richard Nixon in 1971 to impose a global 10% tariff. Section 122 of the Act authorizes the president to impose up a tariff of up to 15% for 150 days when there is a balance of payments/trade imbalance between the US and another country. Trump has highlighted trade imbalance as a key driver of his use of emergency powers.

We expect a case to be brought arguing that Congress passed the aforementioned law specifically to address trade imbalances and to reign in presidential emergency powers to impose a global tariff. A key hurdle for these court cases is a general reluctance by courts to challenge the emergency declarations of a president, and they could point to the Congressional powers under the National Emergencies Act of 1976, which gives Congress a role in overruling a presidentially declared emergency.

At this time, there is cause for skepticism that Congress would be willing to prevent the tariffs from going into effect, but pressure will build if Trump sticks with the current rates and/or the economic and market impacts deteriorate. Under the National Emergencies Act, Congress has the authority to cancel an emergency declared by the president; however, they will need a veto-proof majority to overcome a likely presidential veto. The Senate voted last week 51-48 to overturn the Canadian tariffs, but the House has prevented a vote, and 51 votes is far short of the two-thirds majority needed to overcome a veto.