The United States Supreme Court ruling reshapes the market pricing logic! China and India emerge as the biggest winners in the export chain, and Hong Kong stocks welcome a soaring moment.

At a time when the fate of the U.S. Treasury Department's tax revenue has rapidly reversed due to Trump's tariff policy, and those large economies that have been most heavily impacted by President Donald Trump's global tariff policy over the past year have become the biggest winners after the Supreme Court decided to overturn his emergency tariff policy. The latest calculations 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 U.S. government for all imports/all trading partners has fallen to the lowest level since the tariff announcement on "Liberation Day" in April. After the Supreme Court ruled that Trump's imposition of tariffs on a global scale 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. Despite Trump's subsequent announcement of plans to implement a 15% global tariff rate, the latest calculations by Bloomberg Economics' team of economists show that this would mean a drop in the global average effective tariff rate from around 17% to just about 12% - the lowest level since the introduction of the global "Liberation Day" tariffs in April 2025. For all Asian economies, a study by economists from Wall Street financial giant Morgan Stanley shows that the weighted average tariff rate will drop from 20% to 17%, with the average tariff rate for Chinese goods decreasing significantly from 32% to 24%. However, given that the Trump administration is seeking to rebuild its tariff system through industry-specific and economy-specific tariff frameworks, this relief may only be temporary, indicating that significantly higher existing tariffs on countries like China may still be maintained or adjusted through other specific terms. After announcing the 15% global tariff, Trump stated that he would continue to retain the existing import tariffs under the "301 clause" and "232 clause" frameworks and hinted at initiating more trade investigations. According to the latest facts released by the White House, Trump has instructed the Office of the U.S. Trade Representative to initiate investigations under his "301 clause" authority. Nevertheless, the period of maximum uncertainty regarding tariffs and global trade tensions has largely passed," Morgan Stanley economists led by Chetan Ahya wrote in a report. Overall, the Supreme Court's ruling that the "emergency tariffs" imposed by Trump under the International Emergency Economic Powers Act (IEEPA) were illegal has led to U.S. Customs initiating arrangements to stop the enforcement of relevant IEEPA tariff codes, undoubtedly allowing a group of export-oriented economies previously subjected to higher and more punitive tariff rates to see a decline in the marginal tax burden on shipments to the U.S. in the short term. Economists point to China, India, and Brazil because, following the reversal of the IEEPA tariffs, Trump subsequently opted to introduce a new unified tariff rate under Section 122 of the Trade Act of 1974 (currently set at 15%), economists estimate that the average effective tariff rate for the U.S. may significantly drop to around 12%. "Global trade uncertainty has once again become a concern for investors, which is bad news for U.S. assets. The decline in the dollar may continue, as investors factor in this impact, exacerbating the relative weakness of the S&P 500 index compared to other indices, especially those in the Asia-Pacific region," said MLIV Asia Market Senior Analyst Garfield Reynolds. "In terms of tariffs, Asia and emerging markets may be the biggest beneficiaries of this temporary reduction." The Supreme Court judgment on Trump's tariff policy has ignited market repricing - the weakening of U.S. assets and the strengthening of the Hong Kong stock market The latest announcement of a 15% comprehensive tax has actually reset the trade competition and economic growth landscape facing U.S. trade partners. For large export-oriented economies such as China, the U.S. Supreme Court also cancelled tariffs on fentanyl of up to 10% against China, resulting in lower punitive tax rates for their exports. The core losers include Western developed economies or long-time allies of the U.S. such as the UK and Australia, which negotiated under the global "reciprocal tariffs" framework initiated on Liberation Day and obtained lower rates of about 10%. On Monday, the U.S. dollar index and S&P 500 index futures showed small declines, with Nasdaq index futures falling by more than 1%, mainly due to trade policy uncertainties depressing optimism for U.S. assets. The narrative of "selling the U.S." and the "collapse of the U.S. exceptionalism" has resurfaced. As trade and fiscal policy uncertainties led by the Trump administration caused some large investors to withdraw from the U.S. market, the calls for the "collapse of U.S. exceptionalism" have grown stronger, compounded by overvaluation of the U.S. stock market and high market concentration, and the weakened dollar benefiting emerging market debt repayment and return performance, with funds increasingly seeking diversified allocation. Hong Kong-listed large companies that have long been under heavy tariff pressure have been relieved, with their fundamental growth logic undergoing a scene repair, reflected in the significant rise in stock prices of Chinese companies in Hong Kong amid the U.S. dollar and U.S. stock market volatility, especially in export chains and valuation-driven technology growth stocks - such as tech stocks closely associated with AI. As of Monday's close in the Hong Kong stock market, the Hang Seng Tech Index, covering leaders in China's AI computing industry chain such as Alibaba, Tencent, and Semiconductor Manufacturing International Corporation, surged by over 3%, while the A-share market continued its holiday closure for the Chinese New Year. While the U.S. financial markets are in an "AI disrupts everything" panic mode, with investors heavily selling SaaS software companies, Chinese investors are flocking to AI-related concept stocks. This starkly different market sentiment reflects the fundamental divergence between investors in the two regions on cutting-edge AI technology: the U.S. market fears its existing business models being disrupted, while Chinese investors focus on the economic growth opportunities following the Supreme Court's announcement of Trump's illegal reciprocal tariffs and the potential cost-saving opportunities for enterprises brought by the extensive penetration of China's open-source AI large models in the AI application market. U.S. officials are urging trade partners, including the UK, Australia, the EU, Japan, and Canada, to adhere to the tariff rates and large-scale investment commitments they made in previous trade negotiations. They are also seeking to continue the one-year truce in the trade war with China, with U.S. President Trump planning to visit Beijing soon. "We want to ensure that China fulfills its part in the trade agreement," U.S. Trade Representative Jamieson Greer said on Fox News Sunday. "This means they will continue to purchase the U.S. products they said they would buy." Canada and Mexico have also faced tariffs related to fentanyl, so they stand to benefit as these tariffs are no longer applicable. Senior economists Nicole Gorton-Caratelli, Chris Kennedy, and Maeva Cousin from Bloomberg Economics wrote in a report that if exemptions under the U.S.-Mexico-Canada Agreement (USMCA) continue to be retained, they will be in a "very favorable position." The new 15% tax rate puts countries that previously had a 10% rate in a worse position compared to large Asian economies like China and India. Australia and the UK fall into this category. Meanwhile, countries that previously had a competitive 15% level under the old system, such as Japan, now find that advantage taken away. Although the Supreme Court's ruling has added a new layer of uncertainty, some analysts point out that the strong resilience shown by global trade over the past year and the relatively limited overall changes in average tariff rates suggest that the short-term impact may be somewhat limited. According to a new calculation by another Wall Street financial giant, Goldman Sachs' team of economists, the combination of the Supreme Court's ruling and the new Section 122 tariff, will bring down the rate of increase in the effective tariff rate since the beginning of 2025 from slightly above 10 percentage points to 9 percentage points. "Imports from countries that will experience significant tariff reductions due to the latest policy changes are likely to rebound significantly in the coming months," write the economists at Goldman Sachs. "However, the scale of the impact on GDP should be largely offset by factors such as inventory accumulation and the corresponding increase in consumer spending, a reduction in imports through other countries, and a slight decrease in imports from countries where tariffs have increased." Following the Supreme Court's overturning of the IEEPA tariffs, China is closely monitoring the Trump administration's new trade measures Following the U.S. Supreme Court's rejection of Trump's emergency tariffs, countries including China, India, and Brazil have seen a significant reduction in tariff rates for goods shipped to the U.S. China has stated that it is closely monitoring the Trump administration's plans to advance its tariff system through other trade tools - the first official statement from China since the Supreme Court ruled Trump's international emergency tariffs invalid. A spokesperson for the Chinese Ministry of Commerce stated on Monday that Beijing is currently conducting a comprehensive assessment of the impact of the ruling. "We have also noticed that the U.S. is preparing alternative measures, such as trade investigations, to try to continue its imposition of tariffs on trading partners. China will closely monitor these developments and resolutely defend its own interests," the official said in a statement. China's first official commentary on the ruling comes after the U.S. Supreme Court overturned President Trump's comprehensive global tariffs a few days earlier. Trump then announced a reinstatement of the 15% global tariffs and pledged to conduct new trade investigations to maintain the overall tariff rate. The Hang Seng Index, a key stock index measuring Chinese companies listed on the Hong Kong Stock Exchange, surged by 2.6% in early trading on Monday, while the broader Hang Seng Index closed up 2.53%. As stated above, although Trump introduced new tariffs, calculations by Bloomberg Economics show that this will mean an average effective tariff rate of around 12% - the lowest level since the introduction of the "Liberation Day" tariffs in April. Previously, investigations under Section 301 and Section 232 were used to impose tariffs on Chinese exports, cars, and metals. These alternative legal authorities could allow the White House to implement more import taxes after the ruling. However, for China, the Supreme Court also helped to cancel the 10% fentanyl tariff, resulting in lower punitive tax rates for its exports. The Supreme Court's ruling that Trump's imposition of multiple tariffs under the International Emergency Economic Powers Act (IEEPA) was illegal has led U.S. Customs to initiate arrangements to stop the enforcement of related tariff codes; Trump subsequently introduced a temporary unified global tariff rate under Section 122 of the Trade Act of 1974 (currently set at 15% and subject to a 150-day deadline), essentially replacing the higher and more disparate "emergency tariff system" with a "lower and more unified" baseline. Consequently, the economies that were hit the hardest and had the highest tariff rates under the IEEPA tariffs, in relative terms, have become the "biggest beneficiaries," such as China and India. The overall downward revision of the weighted average tariff level in Asia (Morgan Stanley's calculation method: 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's benefit from the overturning of the "fentanyl-related surcharge" by the court, has reduced the marginal penalty faced by its exports; under this new framework of "baseline shift + convergence of differences," China, India, and Brazil are naturally more likely to be classified as winners. However, broadening the conclusion to "the entire Asia is the biggest winner" would be overly simplistic: a unified 15% baseline pushes some allies (like the UK and Australia) who previously negotiated a 10% lower tariff rate into a worse position, while countries (like Japan and South Korea) that previously enjoyed a "relatively competitive tariff rate" under the old system also find their trade export advantage nullified.