Flexport CEO Ryan Peterson reveals that high tariffs incentivize foreign companies to under-declare goods' value. The U.S. uniquely allows imports without a local entity, meaning there's little recourse when fraud is discovered. This creates a significant competitive disadvantage for American companies that follow the rules.

Given that trade policy can shift unpredictably, rushing to execute multi-year supply chain changes is a high-risk move. According to Flexport's CEO, staying calm and doing nothing can be a radical but wise action until the policy environment stabilizes and provides more clarity.

Even if the Supreme Court rules against the administration, it may not change U.S. tariff levels. The executive branch has alternative legal authorities, like Section 301, that it can use to maintain the same tariffs, making a court defeat less of a market-moving event than it appears.

Stocks most affected by tariffs showed a muted reaction to a pending Supreme Court decision. This suggests investors believe the executive branch could use other authorities to maintain tariffs and that any potential refunds from an overturn would take years to materialize, diminishing the news's immediate market impact.

The success of tariffs hinges on the insight that China's economic model prioritizes volume and employment over per-unit profitability. This creates a vulnerability where Chinese producers are forced to absorb tariff costs to maintain output, effectively subsidizing the tariff revenue and preventing significant price increases for US consumers.

While the base case is that the President would replace tariffs struck down by the Supreme Court, there's a growing possibility he won't. The administration could use the ruling as a politically convenient way to reduce tariffs and address voter concerns about affordability without appearing to back down on trade policy.

Because U.S. tariff levels are likely to remain stable regardless of legal challenges, the more critical factor for the long-term outlook is how companies adapt. Investors should focus on corporate responses in capital spending and supply chain adjustments rather than the tariff levels themselves.

Flexport CEO Ryan Petersen argues that tariffs targeting a single country are ineffective because trade simply reroutes. For example, the U.S. might buy from Peru instead of China, but Peru then uses that income to buy from China. A blanket tariff, applied globally, is more effective at making domestic goods competitive.

While a single tariff hike is a one-time price shock, a policy of constantly changing tariffs can become a persistent inflationary force. The unpredictability de-anchors inflation expectations, as businesses and consumers begin to anticipate a continuous series of price jumps, leading them to adjust wages and prices upwards in a self-reinforcing cycle.