Five key takeaways from the Supreme Court's landmark decision against Trump's tariffs

• Economic impact expected to be limited with growth likely above-trend in Q1 2026; retail and manufacturing sectors are potential major beneficiaries from tariff removal
• Tariff refunds estimated between $85-175 billion remain unresolved, with analysts skeptical the government will pay retroactively as the issue works through lower courts
• Markets rallied on the news but Federal Reserve rate cut expectations remained largely unchanged, with traders still pricing in two cuts in 2026; about 40% of Trump's tariffs remain in place

Supreme Court Strikes Down Trump Tariffs: Five Key Takeaways

Main Development:

The Supreme Court ruled on January 20, 2026, that President Trump exceeded his authority by imposing tariffs using the International Emergency Economic Powers Act (IEEPA), which covered approximately 60% of his implemented tariffs. Despite the ruling, Trump vowed to continue pursuing tariffs through other legal mechanisms under the Trade Act of 1974.

Economic Impact:

Economists expect limited macro effects. Q4 2025 growth slowed mainly due to government shutdowns, with Q1 2026 expected to show improvement. Analysts anticipate above-trend economic growth in 2026, driven by the "One Big Beautiful Bill Act" and easing monetary policy. Tariff-sensitive retail and manufacturing sectors are identified as potential "enormous winners."

Inflation and Federal Reserve:

December inflation data showed continued price pressures. The Fed previously estimated tariffs contributed about 0.5 percentage points to inflation. The ruling reduces near-term inflationary headwinds, though markets now expect the next rate cut in July rather than June. Two cuts remain anticipated for 2026, with 40% odds of a third.

Market Reaction:

Financial markets rallied on the decision, with equities rising and Treasury yields moderately higher. Analysts noted reduced headline volatility but emphasized increased importance of fiscal mechanics going forward.

Refund Uncertainty:

Estimated refunds range widely from $85 billion (Morgan Stanley) to $175 billion (Raymond James). The Supreme Court didn't address refund procedures, with Justice Brett Kavanaugh noting potential complications. Some strategists doubt retroactive refunds will materialize after lower court proceedings.

Outlook:

Approximately 40% of Trump's tariffs remain unaffected. Analysts expect aggressive tariff escalation through Congressional approval and other trade law provisions, with one strategist describing the approach as "all gas, some brakes."