Jahangir Aziz in an interview with ET Now pointed to the legal fragility of tariffs, saying, “Markets think the trade war is settled. It is not. Most tariffs were imposed under the IEEPA Act, and US courts have already ruled them illegal. The case is now with the Supreme Court. If it upholds the rulings, the basis of most tariffs will collapse, and trade deals will unravel.”
He added that Washington could still reimpose tariffs, but the “countries, sectors, and scale would all look different.”
Concerns about global growth continue. Aziz explained, “Since late last year, the slowdown has been masked. Companies frontloaded imports, corporates absorbed tariff costs on their margins, and the tech cycle has been unusually strong. But margins cannot absorb costs forever—by the fourth quarter, inflation will rise, consumption will slow, and the labour market will weaken.”
The technology boom, he noted, has temporarily hidden underlying weakness. “The tech cycle is independent of the business cycle, but how long it lasts is uncertain. Once it slows, the hidden pressures will become more visible.”
On the deficit debate, Aziz was clear that tariffs offer little relief. “Tariffs and the trade deficit are separate issues. A half-percent rise in the US fiscal deficit will need funding. If it comes from foreign borrowing, the current account deficit widens. If funded domestically, savings must rise, but then consumption or investment will fall, slowing growth. There is no free lunch.”As Washington awaits the Supreme Court’s ruling, the stakes are high. A decision against tariffs could reset global trade relations, while the US continues to grapple with the balancing act between fiscal spending, domestic savings, and growth.
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