Markets Grapple With Renewed Tariff Fears After Advisor Signals Policy Resolve
Comments from former Trump advisor Kevin Hassett suggest a protectionist trade stance could persist regardless of a pending Supreme Court ruling, injecting fresh uncertainty.
U.S. markets are navigating a renewed sense of caution as investors digest comments from Kevin Hassett, a former top economic advisor to Donald Trump, which suggest a potential new administration would seek to maintain a hawkish trade policy regardless of judicial challenges. The remarks have reintroduced the specter of broad-based tariffs, complicating the economic outlook and reminding Wall Street of the volatility that defined the U.S.-China trade war.
The debate centers on the fate of tariffs imposed during the Trump presidency, which are currently under review by the Supreme Court. While Hassett expressed confidence that the court would uphold the administration's authority, he revealed that contingency plans are in place to preserve the levies if the ruling is unfavorable. In recent public statements, Hassett noted that if the existing legal basis for the tariffs is struck down, "we've got other tools that we could use that get us to the same place." This signals a determination to maintain protectionist measures, potentially including a baseline 10% tariff on imports, through alternative legal avenues.
This stance has rekindled a debate over the economic impact of such policies. Hassett, who served as Chair of the Council of Economic Advisers, has consistently argued that the burden of tariffs falls largely on foreign exporters and that the measures benefit American workers and manufacturing. He contends that concerns over consumer price inflation are overstated, pointing to past data where tariff implementation coincided with a declining Consumer Price Index as evidence against a significant pass-through of costs to U.S. consumers.
However, that view is not universally shared. A broad consensus of economists, including Federal Reserve Chair Jerome Powell, has previously warned that widespread tariffs risk leading to a combination of higher inflation and slower economic growth. The primary concern is that U.S. importers will be forced to pass on at least a portion of the higher costs to domestic consumers, while retaliatory actions from trading partners could harm American exporters and disrupt global supply chains.
The discussion around trade policy is further complicated by Hassett's emergence as a potential candidate for Federal Reserve Chair in a future Trump administration. His views on the economy are therefore being scrutinized not just for their implications on fiscal and trade matters, but also for what they might signal about the future of monetary policy and the central bank's independence.
For investors, the comments serve as a crucial barometer of political risk heading into a potential change in administration. While the market has not seen a sharp sell-off directly tied to the remarks, the introduction of significant policy uncertainty weighs on sentiment. Companies that rely heavily on global supply chains and international sales are particularly exposed. According to recent reports, the existing tariffs have generated significant revenue, but their next chapter—and the administration's resolve to continue them by any means necessary—will be a key focus for markets in the months ahead.