Lexicon Financial Group Weekly Update — February 25, 2026
“We call a tariff a protective measure. It does protect; it protects the consumer very well against one thing. It protects the consumer against low prices.”
From the desk of Craig Swistun, CIM, MFA-P, Portfolio Manager, Raymond James Investment Counsel, and Wayne Hendry, Client Relationship Manager, Raymond James Investment Counsel
ISSUE 217
Looking Around
Last Friday, the United States (U.S.) Supreme Court, the highest court in the U.S. federal judiciary, struck down International Emergency Economic Powers Act (IEEPA) based tariffs that President Trump had imposed on trading partners globally in April last year. According to U.S. Supreme Court, the president had overstepped his authority by introducing his signature sweeping tariffs using IEEPA.
But like a whack-a-mole, a tariff whacked here just pops up somewhere else. The U.S. administration immediately applied a new global tariff under Section 122 of the 1974 Trade Act, which allows the president to impose a 10 per cent tariff for 150 days without congressional approval. This took effect Tuesday this week and the White House is working to update the rate to 15 per cent to reflect Trump's recent announcement. Trump has repeatedly argued that tariffs are necessary to reduce America's trade deficit—the amount by which imports exceed exports. However, the deficit reached a fresh high last year, widening by 2.1 per cent, compared to 2024, and hitting roughly US$1.2 trillion. (1)
The most recent official data shows that the U.S. has already collected at least US$130 billion in tariffs using the IEEPA. A study by the Federal Reserve Bank of New York found that U.S. businesses and consumers are paying most of these tariffs despite Trump’s statements that the countries that export goods and services to the U.S. pay them. But of course, they are. It’s the businesses that import who pay the tariff, not the country or even the company that ships the goods to the United States. Of course, some businesses have accepted lower profit margins by absorbing a percentage of the tariffs, but that’s a calculated business decision. The rest is passed onto the consumer.
The U.S. Supreme Court decision raises the possibility that businesses that were importing products from abroad might be entitled to billions of dollars in tariff refunds. Some are not simply waiting for the refund. The global transportation and postal company, FedEx, has joined the more than 1,000 companies (including large U.S. corporations like Costco and Revlon) that have filed suit in the U.S. Court of International Trade, in efforts to recoup costs from the IEEPA-appointed tariffs. Most of the lawsuits were already in process ahead of the U.S. Supreme Court decision last week. (2)
So, what happens after the 150-day period?
Trump could ask Congress to authorize tariffs explicitly. However, both the House and the Senate have passed bills disapproving of the IEEPA tariffs and so would likely not provide the authorization that Trump wants. It is expected that tariff rates will be similar, overall, to their level prior to the U.S. Supreme Court ruling, so U.S. consumers will continue to experience higher prices. Businesses that subsidized tariffs by accepting lower profits may feel compelled to recover those losses by keeping prices inflated longer. Above all, businesses in the U.S. will continue to face ongoing policy uncertainty, which is always a challenge when making an investment decision.
In general, the Section 122 regime authorizes across-the-board tariffs, not different tariffs for each trading partner. This will make it more difficult for the U.S. administration to use them to engage in bilateral deal-making. Trump has other cards to play, including tariff authorities that rely on national defense considerations or findings of unfair trade practices. However, these require investigations and findings of fact. The U.S. Supreme Court ruling makes it clear that the power to tax lies with the U.S. Congress. (3)
The fallout threatens to further strain global trade relations. The pushback against the latest U.S. tariff threat illustrates the deep frustration over erratic trade policies and the uncertainty they create. It could push foreign governments to scale back U.S. trade and look to other trading partners, including China. (4)
At least for the time being, there are two things we can say with confidence. The U.S. will continue to look to tariffs as a cornerstone economic policy, and markets and the business climate will remain uncertain. For now, stock markets globally appear to be taking tariffs and continuing geopolitical tensions, such as those between the U.S. and Iran, in their stride.
Read and Watch
Want deeper insight into topics in your Weekly Update? Then, read and/or right click:
Where does the U.S. Supreme Court voiding some Trump tariffs leave Canada?
Trump is right: The economy is strong. But he’s missing the big problem
EU leaders vow to accelerate single market, in struggle to compete with US, China
Japan’s economy avoids technical recession, but fourth-quarter rebound misses expectations
What China’s Spring Festival spending really tells us about its economy
Looking Back
Canadian and U.S. markets made gains last Friday, after the U.S. Supreme Court struck down President Donald Trump’s sweeping tariffs imposed under an emergency powers law. Heading into Friday, the main event for stock markets appeared to be discouraging, with reports showing slowing U.S. economic growth and accelerating inflation. This news, which would make it challenging for the U.S. Federal Reserve (Fed) to cut interest rates, resulted in a relatively muted response from investors. Lifted by technology stocks, the S&P/TSX composite index was up 2.2 per cent for the week and 6.6 per cent for the year. Technology stocks and, in particular, software stocks had been oversold on fears about a worst-case scenario from AI disruptions. (5)
U.S. stock indexes rallied last week (a holiday-shortened week), after generating modest gains through Thursday, on news of the U.S. Supreme Court ruling. Escalating tensions between the U.S. and Iran—which helped send oil prices higher—were also a focus for investors during the week. The Nasdaq Composite performed best, while the S&P 500 Index and Dow Jones Industrial Average made smaller gains.
Fed minutes from its January meeting highlighted the division among policymakers regarding the path forward for monetary policy. While some participants viewed additional easing as appropriate if inflation cools as expected, others acknowledged that upward adjustments to interest rates could be appropriate if inflation remains elevated. The minutes also noted that the majority of participants believe that the downside risks to employment had moderated but the risk of persistent inflation remained. The Bureau of Economic Analysis (BEA) reported that its core (excluding food and energy) personal consumption expenditures (PCE) price index—the Fed’s preferred measure of inflation—rose 0.4 per cent month over month and 3.0 per cent year over year in December, which was up from 0.2 per cent and 2.8 per cent in November, respectively. The headline PCE price index rose 2.9 per cent year over year, a tick higher than the prior month’s reading and the highest level since March 2024.
Separate data from the BEA also indicated that U.S. economic growth slowed sharply in the fourth quarter of 2025—growing at an annual rate of 1.4 per cent compared with 4.4 per cent in the third quarter. This slowdown was primarily attributed to decreases in government spending and exports as well as a deceleration in consumer spending.
The pan-European STOXX Europe 600 Index again hit a new high and registered a 2.08 per cent gain last week. Other major European stock indexes also ended up last week. Key drivers here included improved earnings expectations, broadly supportive macroeconomic data, and investors’ desire to diversify beyond the technology-heavy U.S. market. According to data from Eurostat, seasonally adjusted industrial production in the eurozone fell 1.4 per cent in December last year. This was a greater decline than expected. However, an early reading of the eurozone PMI for February surprised to the upside, with new orders rising at their fastest pace in almost four years.
Stock markets in Japan experienced small declines last week, as geopolitical tensions weighed on global investors’ risk appetite. Japan’s economy grew by less than expected over the final quarter of last year, and consumer inflation rose at the slowest pace in two years in January. The yield on the 10-year Japanese government bond fell to around 2.10 per cent from 2.23 per cent at the end of the previous week, as concerns about the government’s aggressive spending plans subsided. Prime Minister Sanae Takaichi, who earned a solid victory in a snap election earlier in the month, has sought to reassure investors by pledging to pursue responsible and proactive fiscal policy that balances capital investment and fiscal restraint.
Japan’s gross domestic product (GDP) expanded by less than anticipated over the final quarter of 2025. On an annualized basis, fourth-quarter GDP grew 0.2 per cent quarter over quarter, short of consensus expectations of 1.6 per cent growth but up from a contraction in the prior quarter. Japan’s nationwide core CPI rose 2.0 per cent year over year in January, matching consensus expectations and down from 2.4 per cent in December. This is the slowest pace of growth in consumer inflation in two years, with the slowdown driven by softer food price inflation and lowered fuel prices. It looks like government fiscal measures aimed at easing cost-of-living pressures are having some effect.
Chinese stock markets were closed for the Lunar New Year holidays, which started February 16. On other news, the International Monetary Fund (IMF) expects China's economy to grow 4.5 per cent in 2026, up 0.3 percentage points from its October forecast but below the five per cent growth achieved in 2025. The IMF acknowledged that China’s economy has been resilient to shocks but flagged increased challenges to its historical growth model. Transitioning to a consumption-led growth model should be the overarching priority for China, according to the IMF. While the organization welcomed the focus of China’s 15th Five-Year Plan on boosting consumption, it has called for a comprehensive and more forceful response that combines increased macroeconomic policy support with structural reforms.
The Chinese government recently released detailed provisions for its new value-added tax (VAT) law, including raising the VAT rate on telecommunication services to nine from six per cent. The move comes as authorities adjust tax policy amid slower economic growth and persistent deflationary pressure. Major telecom providers—China Mobile, China Unicom, and China Telecom—warned that the higher rate could impact revenue and profitability.
Meanwhile, the U.S. briefly updated and then withdrew a list of Chinese companies allegedly assisting Beijing’s military. The Pentagon added Alibaba Group Holding, BYD Co, Baidu, and TP-Link Technologies to the list before withdrawing it minutes later without an explanation. Alibaba and Baidu rejected the designation, saying they are not military companies. The Pentagon is increasingly using the list to restrict companies’ abilities to contract with the military or to receive research funding. This is a warning to U.S. investors and could be considered a potential precursor to more punitive trade restrictions. (6)
The opinions expressed are those of Craig Swistun and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable, but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors, and we recommend that clients seek independent advice from a professional advisor on tax-related matters.
Trump's new tariff comes into effect at lower than expected rate, Peter Hoskins and Mitchell Labiak, BBC, February 25, 2026
FedEx joins other US companies in seeking a refund after Trump tariffs are ruled illegal, Michelle Chapman, Associated Press News, February 24, 2026
What the Supreme Court's tariff ruling changes, and what it doesn't, Kimberly Clausing and Maurice Obstfeld, Peterson Institute for International Economics, February 23, 2026
Supreme Court ruling throws Trump administration’s tariff strategy into flux. What it means for global trade, U.S. economy, Liz Napolitano, CNBC, February 23, 2026
Markets take Supreme Court tariff ruling, US-Iran tensions in stride, Brian Levitt, Chief Global Market Strategist, Invesco, February 23, 2026
Canadian, U.S. stock markets gain ground amid latest SCOTUS tariff ruling, The Canadian Press via BNN Bloomberg, February 20, 2026
Global markets weekly update - U.S. Supreme Court rules against Trump administration’s wide-ranging global tariffs, T. Rowe Price, February 20, 2026
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Looking to Learn?
If you want to know more about some of the topics we wrote about this week, just click on the links below:
Supreme Court of the United States
Who Is Paying for the 2025 U.S. Tariffs?
Video – White House Official: All countries with trade agreements now drop to a 10% tariff rate
