Supreme Court Topples Trump Tariffs. Here Are 5 Things You Need to Know.

In a different world, perhaps in a parallel universe that favors stability over chaos, I would be spending this weekend introducing you to a surprisingly lovely game that teaches you about Social Security and challenges you to fix the funding shortfall that faces America's social insurance program.

Alas, we live in this world, this universe. And we can't have nice things.

So it is, with the heaviest of hearts, that …

Supreme Court Rules Against Trump

We all lived it, so I won't spend too much time recapping history, but last year, President Donald Trump spent the first few months of his second term instituting tariffs. The earlier tariffs were announced in a fairly ad hoc manner, but he followed those up with a more sweeping set of levies in early April 2025 on what he dubbed "Liberation Day."

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Importantly, Trump invoked the International Emergency Economic Powers Act (IEEPA) to bring most of these tariffs into being. A number of lawsuits challenged the lawfulness of using the IEEPA to enact these import taxes, and two lower courts ruled against Trump; the president, in turn, appealed to the Supreme Court to uphold his tariffs.

It did not.

The nation's highest court struck down the levies with a 6-3 vote. Here's Supreme Court Chief Justice John Roberts, in the majority opinion:

"The President asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration, and scope. In light of the breadth, history, and constitutional context of that asserted authority, he must identify clear congressional authorization to exercise it. 

IEEPA's grant of authority to "regulate …  importation" falls short. IEEPA contains no reference to tariffs or duties. The Government points to no statute in which Congress used the word "regulate" to authorize taxation. And until now no President has read IEEPA to confer such power. 

We claim no special competence in matters of economics or foreign affairs. We claim only, as we must, the limited role assigned to us by Article III of the Constitution. Fulfilling that role, we hold that IEEPA does not authorize the President to impose tariffs."

Hopefully, no one reading this is naive enough to think this puts a tidy little bow on the whole tariff ordeal. It absolutely doesn't. I said last year that the lower courts' rulings opened a world of potential for chaos, and the Supreme Court's ruling has more or less cemented that.

So let's dig into what the Supreme Court's landmark ruling on Trump's tariffs does (and doesn't) mean.

5 Things to Know About the Tariff Decision

Within minutes of the ruling, a bevy of experts—and even the president himself—weighed in on the practical effects of the ruling, as well as what we could expect next. Here are five of the most important takeaways.

1. This ruling did not strike down all tariffs.

The Supreme Court's decision only applies to those that were implemented under the IEEPA authority over the past year or so. It does not apply to tariffs that were enacted using different authorities; in other words, some import taxes will remain in place.

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"By our estimates, the realized average effective tariff rate (duties divided by goods imports) was 9.4% in December, up from 2.3% on average in 2024," says Michael Feroli, Chief U.S. Economist at JPMorgan. "Without the IEEPA tariffs, we estimate this would decline to just over 4%."

2. The president has other ways of enacting tariffs …

"Although IEEPA tariffs were struck down, existing frameworks—most notably Sections 122, 232, 301, and 338—provide the administration with viable avenues to re-deploy duties, albeit with different timelines and constraints," says Jason Pride, Chief of Investment Strategy and Research at Glenmede. "Section 122 tariffs are likely to be used as a near-term stopgap before Section 338 can be implemented or while longer Section 301 investigations are conducted, limiting the risk of a prolonged gap in tariff enforcement."

3. … and already got the ball rolling shortly after the ruling.

Not long after Pride emailed Young and the Invested, President Donald Trump did indeed announce he would enact a 10% global tariff under Section 122.

It's a "near-term stopgap" because tariffs established under that particular authority can only last for 150 days (unless he can get an extension, which would require Congressional approval).

CNN also reported that "he will be initiating several new investigations that are necessary precursors to imposing tariffs under a separate trade law known as Section 301," so a tip of the hat to Jason and his magical crystal ball.

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The key takeaway here is that "the ruling is best viewed as a legal re-routing rather than a dismantling of trade barriers," Pride says.

4. The Supreme Court didn't decide what happens to the already-collected tariffs.

Penn Wharton, at the request of Reuters, produced a budget model to estimate how much the Treasury would have to refund in the event of a reversal of the IEEPA tariffs.

The number: $175 billion.

That's if the government refunds the money, which isn't certain. Nor is how or when that would happen. Because the majority didn't address remuneration in its ruling.

"While the majority opinion is silent on refunds, lower courts are now likely to be tasked with determining whether importers are owed repayments," says Dan Siluk, Head of Global Short Duration & Liquidity and Portfolio Manager at Janus Henderson.

However, while the majority didn't chime in, Justice Brett Kavanaugh did in his dissent, if only to point out the challenge ahead.

"The Court's decision is likely to generate other serious practical consequences in the near term. One issue will be refunds," he writes. "Refunds of billions of dollars would have significant consequences for the U.S. Treasury. The Court says nothing today about whether, and if so how, the Government should go about returning the billions of dollars that it has collected from importers. But that process is likely to be a 'mess,' as was acknowledged at oral argument."

5. The ruling very well could impact markets and the economy, but right now, it's difficult to say exactly how.

While the administration is insistent on keeping tariffs in place somehow, it will have to do so by very different means. So even if the average effective tariff rate ultimately stays the same, different parts of the economy and markets could hit some turbulence, Feroli says.

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"Even this outcome would entail a significant realignment of tariffs placed on different products from different countries," he says. "This would also mean a material increase in trade policy uncertainty, creating a new headwind to capex. While the U.S. economy clearly performed better than feared after liberation day, non-tech capex contracted last year, a very rare occurrence outside of a recession."

It's not all downside, however. "Today's ruling could give the administration a face-saving way to climb down on the average effective tariff rate in a way that could lower prices eventually facing U.S. consumers," he says. 

"Another upside risk relates to rebates. While the official data from CBP is a bit stale, we estimate the amount at stake to be around $150-$200 billion [which, as a note, puts their midpoint right at the Penn Wharton model's estimate]. If the rebates were passed on to consumers, the boost to activity would be significant. In the more likely event that businesses keep the cash, the boost to activity should be smaller, as estimates of the fiscal multiplier from windfall transfers to businesses are usually quite small."

Scott Helfstein, Head of Investment Strategy at Global X ETFs, weighed in on other market impacts:

“The Supreme Court decision to strike down most of the tariffs is probably good for tech stocks, industrials, and consumer companies that were feeling the pricing pressure and export restrictions,” he says. “The court did uphold steel, aluminum, and copper tariffs, which should continue to support U.S. producers in mining and infrastructure.”

Interest rates could be impacted, too. Siluk notes that if the Treasury does eventually have to rebate much or all of the collected tariffs, it might have to finance the resulting fiscal shortfall through higher issuance of debt.

"That raises the risk of further steepening pressure at the long end of the [yield] curve, particularly if refund‑related issuance coincides with already elevated borrowing needs and ongoing [quantitative tightening]," he says. "In that sense, the ruling may reduce trade‑policy tail risks while simultaneously reinforcing structural steepening dynamics in U.S. Treasuries."

Riley & Kyle

Young and the Invested

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