Ahead Today
G3: US Durable Goods
Asia: Thailand Trade, Singapore CPI
Market Highlights
The US Supreme Court ruled that President Trump’s usage of the International Emergency Economic Powers Act (IEEPA) was illegal on 20 Feb 2026 in a 6-3 vote. Post the ruling, President Trump sought to replace the tariffs initially using Section 122 at a rate of 10% across all countries officially, before unofficially announcing over the weekend that this will be raised to 15% instead. For context, the Section 122 legislation allows tariffs of up to 15% for a maximum of 150 days in theory, although there is no historical precedent for usage of this rule.
We provide some initial implications, including from Asia’s perspective.
First, with US trade policy uncertainty likely to continue through 2026, this is one additional factor why our global team remains negative on the Dollar through this year, even as the decision is not entirely surprising by itself. Although there are alternative trade authorities that the Trump administration can and will likely rely on to replicate the tariffs moving forward, they are more constrained and cumbersome relative to IEEPA. Section 122 is a good example, given that Congress will have to approve an extension of the tariffs beyond 150 days, and also that it has never been used in practice in its stated purpose of dealing with large and serious balance of payments deficits. Other key authorities include Section 232 and Section 301, which tend to be more narrow and sectoral, with time needed for investigation but they come with stronger legal footing and historical precedent
Second, we ultimately expect the Trump administration to largely replicate the existing tariff set, and as such we think countries will largely honour their side of trade deals at the end of the day, even as some may take a pause to reassess. Post the decision, we saw several US trading partners such as the EU and India potentially pausing the next steps of negotiation and implementation of the trade deal, and we think this makes sense as a step to reassess the implications of the Supreme Court Ruling. Nonetheless, we think countries generally recognise that Trump will push through with using alternative legislative authorities.
Third, countries which were beneficiaries and who have trade deals have come out slightly worse off in the interim, while those such as China and Brazil which have not finalized full trade deals have come out much better. In Asia, Singapore is a key example where it received the baseline 10% tariff and will likely see effective tariffs rise if the 15% tariffs under Section 122 is ultimately imposed. Meanwhile, the likes of Brazil and China will likely see effective tariffs cut by around 7% to 16% over the next few months, based on analysis by Global Trade Alert, and as such they come up as relative beneficiaries. From a relative export competitiveness perspective, this also means that the tariff differential between other Asia exporters versus China has been narrowed in the interim, and reduces the incentive to re-route exports to the US at the margin.
Fourth, we think effective tariff rates are likely to come off somewhat lower over time in 2026 including through exemptions. The tariff announcement over the weekend saw Trump also add in some additional exemptions through items such as aircraft parts. With this year a mid-term election year, we think the bias would be for tariffs to come lower even as Trump will probably still make many threats and announcements.
Overall, we as such continue to like the tech and export oriented currencies such as KRW, TWD, MYR, and also see USD/CNY grinding lower over time as a path of least resistance, and also helped by our expectation for a weaker US Dollar. We think the high yielding currencies such as INR and IDR will underperform including for domestic reasons.
