N.M. state treasurer joins national call to fix economy after year of ‘Liberation Day’ tariffs

Coalition report blames President Trump's April 2, 2025 'Liberation Day' tariffs for eliminating ~200,000 blue-collar jobs and costing the average U.S. household about $1,700 between Feb 2025 and Jan 2026. The U.S. Supreme Court ruled the tariffs illegal, but state officials — citing an earlier AG estimate of ~$166bn paid and claiming roughly $24m of interest accrual daily — warn the economic damage may be irreversible and are pressing Congress and states to pursue refunds. New Mexico Treasurer Laura Montoya and other state finance officials say trade-dependent, lower-income states are especially vulnerable and are open to pursuing remedies for residents.

Analysis

The policy reversal creates a bifurcated opportunity set: firms that had benefited from import protection (steel, basic manufacturing) now face margin compression as competitive import pricing reasserts itself, while import-heavy retailers and consumer discretionary chains will see a slower recovery in gross margins than headline CPI suggests. Expect inventory re-pricing and a delayed demand shock: retailers carrying goods bought at tariff-inflated prices will either eat margin or mark down — a two- to four-quarter adjustment window that amplifies Q/Q earnings volatility.

State-level balance sheet dynamics are a second-order amplifier. If legislated refunds are pursued piecemeal, cash flow to certain states could be lumpy and politically earmarked rather than fungible, producing asymmetric improvements in some municipal credits while leaving others exposed to higher social spending needs; watch outsize movements in lower-rated, trade-exposed state munis over 6–18 months. Meanwhile, litigation and refund uncertainty are a persistent drag on capital expenditures for cross-border supply chains, incentivizing incremental nearshoring investments that benefit logistics, short-cycle industrial suppliers, and automation vendors over 12–36 months.

Catalysts to watch: Congressional refund proposals (weeks–months), targeted settlements or injunctions in litigation (months), and quarterly retail inventories (1–2 quarters) that will reveal margin pass-through. The ‘consensus’ that this is chiefly a short-term consumer tax misses the multi-year reallocation of supply chains and the fiscal arbitrage states will attempt — outcomes that create asymmetric tail risks for cyclical equities and select munis.

Key Decisions for Investors

• Short XRT (Retail ETF) 3–6 months via buy Dec-2026 2.5% OTM put calendar spread — rationale: import-dependent retailers face a 1–3 quarter margin squeeze from inventory repricing; target 1.5x premium collected, stop if S&P retail index outperforms by >8% in 30 days.
• Buy TIP (iShares TIPS ETF) 3–12 months — rationale: sticky pass-through and episodic fiscal transfers increase real-term uncertainty and tilt to inflation protection; risk: Fed disinflation surprise — cap position at 3% portfolio and set trailing 20% stop.
• Initiate small-cap pair: short NUE (Nucor) vs long a logistics/automation name (e.g., IYT or ROBT exposure) over 6–12 months — rationale: domestic metal producers lose protective pricing while nearshoring boosts logistics/automation spend; target 2:1 reward:risk with stop-loss at 12% adverse move.
• Buy EWW (iShares Mexico ETF) 6–12 months on policy normalization thesis — rationale: reversal of protectionist premium and revived cross-border trade flows should re-rate Mexican exporters and manufacturing hubs; risk: geopolitical or currency shocks — position size 2% with FX-hedge consideration.