Commerzbank’s Thu Lan Nguyen notes that recent U.S. Supreme Court rulings have thrown U.S. tariff policy into chaos, and President Trump responded by announcing and then raising a modern global tariff rate. He argues that markets have focused on fiscal implications and tariffs as a foreign policy tool, raising questions for dollar investors about what instrument could replace tariffs if they are restricted.

Tariffs as a key lever of dollar policy

“How have currency markets reacted to the developments so far? The dollar weakened on Friday after hearing the court verdict. Although the depreciation was moderate, the reaction is not trivial.”

“However, the market seemed to be primarily focused on another aspect: the fact that tariffs are an important source of financing for the government’s expansionary fiscal plans. Not only would phasing out tariffs deprive the U.S. Treasury of a future revenue stream, but tariffs already collected would likely have to be repaid.”

“The government now appears to have resolved this issue by making it clear that it will look for other options to continue imposing tariffs. Don’t be fooled by the fact that the newly introduced global flat rate can only last for 150 days. There are quite a few other ‘sections’ that the administration can rely on to implement tariffs.”

“And we can be sure that the people in the White House will do everything they can. Forget the fiscal implications, forget the trade policy implications. If one thing has become clear, it is that from the perspective of the American president, tariffs are the ultimate instrument for enforcing foreign policy goals.”

“As a dollar investor, I would be more concerned about the potential instrument that could be used than any tariff….”

(This article was created with the aid of an artificial intelligence tool and has been reviewed by an editor.)