Michael Zezas, Morgan Stanley's Global Head of Fixed Income Research and Public Policy Strategy, and Michael Gapen, Chief U.S. Economist, discuss the U.S. Court of International Trade's decision to strike down President Trump's reciprocal tariffs. While the ruling initially appears to be a setback for the administration, Zezas explains that the administration possesses alternative legal avenues to maintain the existing tariff levels. Gapen, while not a trade lawyer, notes that the ruling aligns more with their team's original prediction that tariffs would increase more gradually, primarily through Sections 301 and 232. Both agree that the court ruling doesn't significantly alter their outlook on U.S. economic growth, inflation, or Federal Reserve policy, anticipating a slow growth, sticky inflation, and a patient Fed response, with potential Fed cuts pushed to 2026.
