UBS(US:UBS) Sou Hu Cai Jing·2025-11-06 08:24Core Viewpoint - UBS analysis indicates that if the U.S. Supreme Court rules Trump's tariff policy illegal, it could force the U.S. government to refund approximately $140 billion in taxes to importers, which represents 7.9% of the projected federal budget deficit for FY2025 [1] Group 1: Economic Impact - A ruling against the government could lead to immediate fiscal shocks due to the large tax refunds, potentially resulting in a structurally low-tariff trade environment if trade partners do not retaliate [1] - This low-tariff environment could ultimately benefit the U.S. economy and stock market [1] Group 2: Government Response - UBS estimates that the government is likely to utilize legal tools from the Trade Act of 1974, specifically Sections 201 and 301, to rebuild tariff barriers, although this process may take several quarters and reduce trade policy flexibility [1] Group 3: Market Implications - While refunds may provide unexpected financial benefits to import businesses, the impact on the overall market may be limited as tariff costs have not significantly lowered S&P 500 earnings expectations [1] - The ruling could lower the overall effective tariff rate, enhance household purchasing power, alleviate inflationary pressures, and provide the Federal Reserve with more room for interest rate cuts, which would generally be welcomed by stock market investors, provided trade partners refrain from escalating retaliatory measures [1]