SCOTUS Strikes Down Trump Tariffs—Uncertainty Returns to the Markets

by | Feb 25, 2026 | Client Communication, Our Insights

It’s off again. After months of on-again, off-again tariff negotiations last year, the Supreme Court of the U.S. (SCOTUS) nullified Trump’s tariffs last Friday. In a 6-3 vote, the justices ruled that the tariffs exceeded powers granted to the president under the 1977 International Emergency Economic Powers Act (IEEPA). The IEEPA authorizes the president to regulate international commerce after declaring a national emergency, but the act did not authorize the president to set tariffs.

SCOTUS’s ruling was narrow and left many ancillary questions unanswered. Will the captured tariffs need to be refunded? If so, to whom… importers, consumers, or someone else?   What about the trade agreements? Are they null and void, as the basis for the trade negotiations was the tariffs, or will they stand? How will other countries interpret the ruling?

The above legal questions will have economic ramifications. These questions won’t likely be answered for weeks, if not months. At the same time, financial markets operate in the here-and-now with imperfect information. We’ve said it before, and we’ll say it again: uncertainty is the market’s kryptonite. With unanswered questions and a new set of certainties entering the fray, financial markets are bound to experience volatility.

The dissenting opinion, written by Justice Kavanaugh, acknowledged that “the tariffs have generated vigorous policy debates.” But such debates, he said, “are not for the Federal Judiciary to resolve. Rather, the Judiciary’s more limited role is to neutrally interpret and apply the law.” In Kavanaugh’s view, Trump had the authority under IEEPA to impose the tariffs because they “are a traditional and common tool to regulate importation.”1

After the SCOTUS ruling, President Trump quickly announced a 15% tariff under Section 122 of the 1974 Trade Act. That statute allows the president to impose tariffs of up to 15% for up to 150 days to address trade deficits. After 150 days, Congress would need to approve any extension. This may give the financial markets some semblance of a status quo as ancillary questions are settled.

As the year began, we noted significant fiscal and monetary stimulus ready to drive the economy forward. A couple of notable items originated from the trade negotiations such as Foreign Direct Investment (FDI) commitments and a clearer tariff picture (i.e. removed tariff negotiation uncertainty). The latest SCOTUS decision reintroduced tariff uncertainty and may have impacted FDI commitments. Other aspects of our thesis remain intact: lower interest rate effects, weighty depreciation allowances, tax law changes and deductions, lower regulatory burdens, and productivity increases.

Economics are in a constant state of flux. Financial markets and market participants are continually evaluating changes, so the latest SCOTUS decision did not come as a surprise, as it was a possible outcome. Answers to the secondary questions will be important to evaluate as they present themselves.

 

1 https://www.scotusblog.com/2026/02/supreme-court-strikes-down-tariffs/