Tariffs Weigh on Dollar, But Refunds Remain Elusive

The US dollar has been experiencing a decline in recent times, and while concerns over US trade policy are contributing to this trend, they are not the only factor at play. According to Gerry Fowler, UBS Chief European Equity Strategist and Head of Derivates, the dollar's depreciation is also being driven by US investors investing offshore. "It's not the most important driver in markets at the moment," Fowler tells Bloomberg Television. "Currency depreciation is not just being driven by uncertainty, which was really the story of last year. It's now being driven by US investors investing offshore."

This shift in investor behavior is just one aspect of the complex landscape surrounding US trade policy. The ongoing uncertainty has led to a decline in the dollar's value, making imports more expensive and potentially affecting the overall economy. However, the impact of tariffs imposed under the International Emergency Economic Powers Act (IEEPA) has been a major point of contention.

In a recent ruling, the US Supreme Court declared that Donald Trump's tariffs under the IEEPA were illegal. However, the court did not address the issue of refunds for businesses that have already paid these tariffs. This has left hundreds of companies that have taken legal action seeking refunds facing further litigation. Janet Whittaker, Senior International Arbitration and Disputes Partner at Clifford Chance, notes that the decision is likely to be sent back to the US Court of International Trade.

"The Supreme Court's decision was a significant development, but it did not provide clarity on the refund issue," Whittaker explains. "This means that businesses will likely have to continue fighting for refunds through the courts, which can be a lengthy and costly process."

The IEEPA tariffs were imposed in 2018, and since then, numerous businesses have challenged their legality. The Supreme Court's ruling has provided some vindication for these companies, but the lack of clarity on refunds has created further uncertainty. Whittaker notes that the US Court of International Trade will likely have to consider the issue of refunds, which could lead to a lengthy and complex legal process.

The impact of the tariffs and the subsequent litigation has been significant for businesses that have been affected. Many companies have had to absorb the costs of the tariffs, which has affected their bottom line. The uncertainty surrounding refunds has also made it difficult for businesses to plan for the future.

The decline of the US dollar has also had far-reaching consequences for the global economy. A weaker dollar makes imports more expensive, which can lead to higher inflation and affect economic growth. The ongoing uncertainty surrounding US trade policy has also led to a decline in investor confidence, which can have a ripple effect throughout the global economy.

In conclusion, the US dollar is facing pressure from various factors, including trade policy uncertainty and US investors investing offshore. The issue of refunds for IEEPA tariffs remains unresolved, leaving businesses facing further litigation. As the situation continues to unfold, it is clear that the impact of US trade policy will be felt far beyond the country's borders.