The US Supreme Court's ruling reshapes market pricing logic! China and India's export chains emerge as the biggest winners, and Hong Kong stocks welcome a soaring moment.

At a time when there is a rapid reversal in the fate of the Trump tariff policy and even the revenue of the US Treasury, those large economies that have been hit hardest by the global tariff policy led by US President Donald Trump over the past year have become the biggest winners after the US Supreme Court decided to overturn its emergency tariff policy. The latest data calculated by economists show that the weighted average tariff rate in Asia will drop from 20% to 17%, and the overall "average effective tariff rate" calculated by the US government for all imports/all trading partners has dropped to the lowest level since the announcement of the "Liberation Day" tariffs in April. Following the US Supreme Court ruling that Trump's imposition of tariffs globally under the International Emergency Economic Powers Act (IEEPA) was illegal, large economies such as China, India, and Brazil now have lower tariff rates for shipments to the largest export destination - the United States. Although Trump shortly thereafter announced plans to implement a 15% global tariff rate, the latest calculations by Bloomberg Economics show that this will mean a drop in the global average effective tariff rate from around 17% to just about 12% - the lowest level since the announcement of the "Liberation Day" tariffs in April 2025. For all Asian economies, a research report from Morgan Stanley's team of economists on Wall Street shows that the weighted average tariff rate will drop from 20% to 17%, with the average tariff rate for Chinese goods dropping significantly from 32% to 24%. However, given that the Trump administration is seeking to rebuild its tariff system through industry-based and economy-based tariff frameworks, this relief may only be temporary, which means that significantly higher than 10% existing tariffs on countries such as China may still be maintained or adjusted through other specific terms. Recently, after announcing a 15% global tariff, Trump said he plans to retain the existing import tariffs under the "301 clause" and "232 clause" frameworks and hinted at launching more trade investigations. According to the latest facts released by the White House, Trump has instructed the US Trade Representative's Office to initiate investigations under its "301 clause" power. Nevertheless, "the peak period of uncertainty in tariffs and global trade tension is largely over," wrote Chetan Ahya-led team of economists at Morgan Stanley in a report. Overall, with the US Supreme Court ruling that the "emergency tariffs" imposed by Trump under the International Emergency Economic Powers Act (IEEPA) were illegal, US customs has initiated arrangements to stop the collection of related IEEPA tariff codes, which will undoubtedly allow a group of export-oriented economies that were previously subject to higher and more punitive tax rates to see a downward adjustment in marginal tax burden on shipments to the US in the short term. Economists have pointed out China, India, and Brazil for a number of reasons, key among which is that following the cancellation of IEEPA tariffs, coupled with Trump's subsequent introduction of a new unified tariff rate under section 122 of the 1974 Trade Act (currently set at 15%), economists have calculated that the US average effective tariff rate could see a significant decrease, falling to around 12%. "The uncertainty of global trade has once again become a concern for investors, which is bad news for US assets. The decline in the US dollar may continue, as investors factor in this impact, with the S&P 500 index likely to underperform other indices, especially compared to those in the Asia-Pacific region," said Garfield Reynolds, a senior analyst at MLIV Asia Market. "In terms of tariffs, Asia and emerging markets may be the biggest beneficiaries of this temporary reduction." The US Supreme Court's ruling and the "back and forth" of Trump's tariff policy have ignited market repricing - weakening US assets while Hong Kong stocks have shown strength The latest announcement of a 15% comprehensive tax by the Trump administration has actually reset the trade competition and economic growth landscape faced by US trading partners. For large export-oriented economies such as China, the US Supreme Court has also canceled the fentanyl tariffs of up to 10% against China, so their exports now face lower punitive tax rates. The main losers are Western developed economies such as the UK and Australia, which are long-standing allies of the US, which had negotiated lower tax rates of around 10% under the reciprocal tariff framework launched on Liberation Day. On Monday, the US dollar index and S&P 500 index futures showed a slight decline, with Nasdaq index futures falling by more than 1%, mainly due to the uncertainty of trade policies suppressing optimistic sentiment for US assets in the market, leading to a resurgence of the "sell off US" narrative and the "collapse of the US exception" argument. As uncertainties around Trump-led tariffs and fiscal policies led some large investors to withdraw from the US market, the calls for the "collapse of the US exception" grew stronger, combined with the overvaluation of the US stock market and its disproportionately high market concentration, and the weak US dollar favoring the debt repayment and yield performance of emerging markets, funds are increasingly seeking diversified allocations. Hong Kong-listed large companies that have long been under heavy tariff pressure have sighed with relief, as their fundamental growth logic has undergone a scenario repair, leading to significant increases in stock prices for Chinese companies in Hong Kong amid the oscillation of the US dollar and US stocks, particularly in the performance of the export chain in the Hong Kong stock market and valuation-driven technology growth stocks - such as tech stocks closely related to AI saw significant price gains. As of the closing on Monday, the Hang Seng Tech Index, which includes leaders in the Chinese AI computing industry chain such as Alibaba, Tencent, and Semiconductor Manufacturing International Corporation, rose by over 3%, while the A-share market continued to be closed for the Chinese New Year holiday. While the US financial market is caught up in "AI disrupting everything fear trading," investors are selling off SaaS software companies, Chinese investors are keen on snapping up AI-related concept stocks. This contrasting market sentiment reflects fundamental differences between investors in the two regions on advanced AI technology: the US market is concerned about the disruption of existing business models, while Chinese investors are focusing on the economic growth opportunities after the Supreme Court announced the illegality of Trump's reciprocal tariffs and the potential for cost reduction for enterprises with the vast potential of open-source AI models in the Chinese market. US officials are now urging trade partners including the UK, Australia, the EU, Japan, and Canada to uphold the tariff rates and large-scale investment commitments they made in previous trade negotiations. They are also seeking to continue the one-year truce with China in the trade war, as US President Trump plans to visit Beijing soon. "We want to make sure that China fulfills its part of the trade agreement," said Jamieson Greer, the US trade representative, on Fox News Sunday. "This means they will continue to purchase the US products they said they would buy." Canada and Mexico have also faced tariffs related to fentanyl, so with these tariffs no longer applicable, they too stand to benefit. Economists Nicole Gorton-Caratelli, Chris Kennedy, and Maeva Cousin from Bloomberg Economics wrote in a report that if exemptions under the US-Mexico-Canada Agreement (USMCA) continue to be preserved, they will be in a "very advantageous position." The newly announced 15% tariff rate makes the trade position of countries that were previously subject to a 10% tariff rate relatively worse compared to the large Asian economies such as China and India. Australia and the UK fall into this category. Meanwhile, countries that previously enjoyed a competitive 15% tariff rate for exports to the US under the old system, such as Japan, now find that this advantage has been deprived. Although the US Supreme Court's ruling adds a new layer of uncertainty, analysts have pointed out that the global trade has shown strong resilience over the past year, and the overall change in average tariff rates has been relatively limited, suggesting that the short-term impact may be somewhat limited. The latest calculations from the team of economists at another Wall Street giant, Goldman Sachs, show that the combination of the Supreme Court ruling and the new Section 122 tariff rate will reduce the increase in the effective tariff rate since the beginning of 2025 from slightly more than 10 percentage points to 9 percentage points. "The imports from countries that will see a significant reduction in tariffs due to the latest policy changes are likely to increase significantly in the coming months," wrote the economists at Goldman Sachs. "However, the impact on GDP should be largely offset by factors such as inventory accumulation and corresponding increase in consumer spending, decrease in imports redirected through other countries, and slight decrease in imports from countries with rising tariff rates." After the US Supreme Court overturned the IEEPA tariffs, China closely watches the Trump administration's new trade measures Following the US Supreme Court's rejection of Trump's emergency tax, countries including China, India, and Brazil have significantly reduced the tariff rates on goods shipped to the US. China has stated that it is closely monitoring the Trump administration's plans to advance its tariff system using other trade tools - this marks the first official statement from China since the US Supreme Court ruled the President's global emergency tariffs invalid. A spokesperson for the Chinese Ministry of Commerce said on Monday that Beijing is currently conducting a comprehensive assessment of the impact of the ruling. "We also note that the US is preparing alternative measures, such as trade investigations, trying to continue to impose tariffs on trading partners. China will closely monitor these developments and firmly defend its interests," the spokesperson stated in a declaration. China's first official comment on the ruling came shortly after the US Supreme Court overturned President Trump's comprehensive global tariffs a few days ago. Trump subsequently announced plans to reimpose a 15% global tariff and pledged to conduct new trade investigations in an attempt to maintain overall tariff rates. A key stock index measuring the performance of mainland Chinese companies listed in Hong Kong surged as much as 2.6% in early trading on Monday, while the broader Hang Seng Index closed up by 2.53%. As mentioned earlier, despite Trump's introduction of new tariffs, Bloomberg Economics' calculations show that the average effective tariff rate will be about 12% - the lowest level since the announcement of the "Liberation Day" tariffs in April. Previously, investigations under Section 301 and Section 232 had been used to impose tariffs on Chinese exports, automobiles, and metals. These alternative legal authorizations may allow the White House to continue to impose more import taxes after the ruling. However, for China, the Supreme Court also helped to lift the 10% fentanyl tariff, leading to lower punitive tax rates for its exports. The US Customs has initiated arrangements to stop the collection of related tariff codes following the US Supreme Court's ruling that Trump's multiple tariffs imposed under the International Emergency Economic Powers Act were illegal; Trump then introduced a temporary unified global tariff rate under Section 122 of the 1974 Trade Act (currently set at 15% and bound by a 150-day deadline), replacing the higher and more varied "emergency tariff system" with a "lower and more unified" framework. As a result, economies that were hit hardest and had their tax rates raised the highest by the IEEPA tariffs in a relative sense have become the "biggest beneficiaries," such as China and India. The overall weighted average tariff level in Asia has been adjusted downward (according to Morgan Stanley's calculation methodology: from about 20% to about 17%, and the average tariff rate for Chinese goods is expected to drop from about 32% to about 24%), combined with China benefiting from the partial lifting of "fentanyl-related additional taxes" by the court, allowing for a reduction in the marginal punishment facing its exports; under this new framework of "baseline shift + convergence of differences," China, India, and Brazil are naturally more easily categorized as winners. However, expanding the conclusion to "the entire Asia is the biggest winner" would be an oversimplification: the uniform 15% baseline pushes some allies (such as the UK and Australia) who previously talked about a 10% low tax rate into a worse position; and countries (such as Japan and South Korea) that previously enjoyed a "relatively competitive tax rate" in the old system will find their export advantage eroded.