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Investing.com -- Markets remain on edge as the Trump administration's sweeping new tariffs continue to send shockwaves through global trade and equity markets.
Today, Raymond (NSE:RYMD) James strategists laid out three potential scenarios for how the tariff situation may unfold—and the implications for investors are significant.
According to the research firm, the three main paths are:
1) Trump begins making deals and tariffs are reduced;
2) The courts or Congress intervene to block or limit the tariffs; and
3) Trump stays the course, solidifying what could become a historic realignment of global trade.
“The market is hoping for a combination of 1 and 2,” Raymond James strategist Ed Mills wrote. “But there are growing concerns about the possibility and uncertainty of the third path.”
Crucially, the note emphasizes that President Trump holds unilateral control over paths 1 and 3, which complicates market expectations.
Legal challenges could center on Section 122 of the Trade Act of 1974, which gives the president authority to impose tariffs of up to 15% for 150 days in response to trade imbalances.
Trump has cited trade deficits as a justification for invoking emergency powers, echoing President Nixon’s use of similar authority in 1971 to impose a global 10% tariff.
Raymond James notes that a legal case could argue that Congress passed the 1974 Trade Act specifically to constrain presidential emergency powers, raising questions about the constitutionality of Trump’s current approach.
Still, the courts have historically been reluctant to challenge presidential emergency declarations. And while the National Emergencies Act of 1976 gives Congress the power to revoke such declarations, doing so would require a veto-proof majority—a high bar in the current political climate.
Last week, the Senate voted 51-48 to overturn tariffs on Canadian goods, but the House has yet to take up the measure, and the Senate’s vote falls well short of the two-thirds threshold needed to override a veto.
Raymond James warns that if economic or market conditions worsen, political pressure on Congress could increase.
“This is the latest flashpoint in the broader fight over the ‘power of the purse,’” the firm added, noting that the Constitution grants Congress authority over taxation and trade—but that power has been incrementally delegated to the executive branch in recent decades.