Chief Investment Strategist, The Freeport Society
Don’t breathe a sigh of relief just yet.
The U.S. Court of International Trade stabbed a knife through the heart of President Trump’s tariffs on Wednesday night, but this saga is far from over.
Yes, the 50% levies threatened on European Union imports are no more. The 10% baseline tariffs on most goods are gone.
But…
Not all tariffs got axed, and they may be coming back repackaged under another order.
So, in today’s Navigator I’m going to break it all down for you. Then I’ll share with you how to position your investment portfolio to not only survive this chaos, but thrive through it.
A Win for Free Markets
While the president does have the power under the International Emergency Economic Powers Act (IEEPA) to slap on tariffs without Congress’ input… there needs to be an actual emergency involved. That was the court’s opinion, and it tracks.
Chronic trade deficits is a slow-burning crisis, not an “emergency” by any stretch of imagination..
So the “reciprocal” tariffs that have been roiling the markets since April 2 – which were invoked under the IEEPA – are now null and void. This doesn’t mean the tariff rates go back to 2024 levels. But it gets us darn close.
At The Freeport Society we believe in free markets and free trade. You and I should be free to do business with anyone we want without the state meddling, with precious few exceptions for national security and basic law and order. After all, that’s the definition of a free society.
So, this court decision is a win for economic freedom… for competition… and for lower prices on store shelves.
But, there’s more to this story. The larger economic forces that ignited Trump’s Trade War haven’t gone away.
What’s left?
Not All Tariffs Were Shot Down
Under the Trade Expansion Act of 1962, the president has the authority to impose tariffs on imports deemed to be a national security threat. And that’s how Trump justified the tariffs on steel and aluminum, for example.
Of course, he isn’t the first president to invoke the 1962 Act.
Presidents Gerald Ford, Ronald Reagan, and George HW Bush all used it to varying degrees to lessen American dependence on imported oil. And President Barack Obama considered using it to lessen dependence on uranium imports, although he ultimately backed off.
This hasn’t been challenged in court… yet.
So, product-specific tariffs are still fair game, if they pose a “security threat.” Some of the tariffs will legitimately fall under this umbrella. Most realistically won’t.
Fair’s Fair
Separately, the Trade Act of 1974 gives the president the authority to levy tariffs in response to unfair trade practices, like intellectual property theft. That was Trump and Biden’s justification for the tariffs on China.
Every president since Gerald Ford has invoked the 1974 Act as a rationale for some degree of protectionism. Trump was just more aggressive about it.
Of course, given Trump’s insistence that trade deficits are “unfair,” he could simply reimpose the Liberation Day levies using the 1974 Act as justification.
But we should remember that the courts shot down George W. Bush’s steel tariffs – which he justified under the 1974 Act – and they were far smaller and less sweeping than Trump’s.
We’ll see how this plays out.
It’s safe to assume a lot of lawyers will enjoy massive bonuses this year as this gets duked out in court.
Regardless, we must continue in our mission to build wealth as this Age of Chaos roils around us.
Here’s who we do that…
The Dominant Trend is Still Intact
The Age of Chaos is a time of rapid, whiplash-inducing change in the government, the economy, and – most critically – in technology. The trade war was just one manifestation of this.
Trump’s tariffs were motivated in part by the disintegration of U.S.-China relations.
Our dependence on China, particularly for sensitive electronics and commodities like rare earth elements, was and still is a legitimate security risk.
It was always madness to depend on our biggest geopolitical rival to supply us with the hardware we need to equip our army.
I wrote about this earlier this month in my flagship newsletter Freeport Investor, offering two stocks for my paid subscribers to profit from a revival in American rare earths production.
While it wouldn’t be fair to those paid-up subscribers to give you the details of those stocks, you might want to consider the VanEck Rare Earth and Strategic Metals ETF (REMX). It’s a basket of some of the largest players in this space and offers broad exposure to rare earths and critical minerals.
Just remember, this is only one opportunity of the hundreds this Age of Chaos has in store for us.
And here at The Freeport Society, we’re committed to finding as many of those opportunities for you.
Stay tuned for more to come.
To life, liberty, and the pursuit of wealth in the Age of Chaos,
Charles Sizemore
Chief Investment Strategist, The Freeport Society