What to Expect in the New Tariff Turmoil

• The ruling shifts tariff policy from potential sudden shocks to structured processes requiring investigations under Section 232 or 301, reducing uncertainty but not eliminating tariff risk entirely
• Goldman Sachs estimates the net tariff reduction is modest, dropping effective rates from just over 10 percentage points to about 9%, meaning significant trade pressure remains
• Two major uncertainties persist: whether companies will receive billions in refunds for already-paid tariffs (likely taking 2-5 years to resolve) and whether Section 122 tariffs can provide a durable long-term framework

Market Summary: Supreme Court Tariff Ruling and Trump's Response

Key Development:

The Supreme Court ruled 6-3 on Friday that President Trump exceeded his authority by using the 1977 International Emergency Economic Powers Act (IEEPA) to impose sweeping global tariffs. Chief Justice John Roberts wrote that IEEPA does not explicitly authorize tariffs.

Financial Impact:

The struck-down IEEPA-based tariffs were projected to raise approximately $1.5 trillion over the next decade, representing roughly 70% of Trump's second-term tariff program. However, Goldman Sachs estimates the net reduction in effective tariff rates is modest—dropping from just over 10 percentage points to about 9.

Administration Response:

Within hours of the ruling, Trump announced a 15% blanket tariff under Section 122 authority (initially proposed at 10%). The administration will maintain existing tariffs under other authorities, including Section 232 steel and aluminum tariffs based on national security grounds.

Major Uncertainties:

1. Refund Question: Hundreds of companies have filed lawsuits seeking refunds on already-paid tariffs. Potential refunds could return billions to corporate balance sheets but create significant Treasury fiscal impacts. Trump suggested litigation could take 2-5 years.

1. Durability: Section 122 is temporary. Longer-term tariff frameworks would require Section 232 or Section 301, both requiring months-long investigations.

Market Implications:

Import-heavy retailers and consumer brands (Williams-Sonoma, Nike, Deckers, Lowe's) could benefit from reduced tariff uncertainty and better earnings visibility. The ruling provides clearer policy rules, reducing one uncertainty layer, though the 15% tariff maintains pressure. International negotiations face fresh uncertainty as the EU freezes ratification and India postpones trade talks.

The ruling shifts tariff risk from sudden shocks to structured processes—a modest positive for markets that favor predictability.