Alternative Plans Emerge as Trump Tariff Ruling Looms

The U.S. Supreme Court is set to issue a ruling on the legality of President Donald Trump’s sweeping tariffs as early as Friday, a decision that could redefine U.S. trade policy and federal revenues. At the heart of the case is whether the Trump administration had the legal authority under the International Emergency Economic Powers Act (IEEPA) to impose tariffs on imports from nearly all major trading partners according to reports. Lower courts have ruled against the administration, finding that IEEPA does not grant the president authority to impose tariffs.

Treasury Secretary Scott Bessent has stated that the administration is prepared to continue collecting tariffs at roughly the same level in terms of overall revenue, regardless of the ruling. He acknowledged that the president would lose flexibility to use tariffs as a tool for national security and negotiations if the court rules against the administration.

If the Supreme Court strikes down the tariffs, the administration has signaled it would pursue alternative legal avenues, including provisions under the Trade Expansion Act of 1962. However, officials acknowledge these mechanisms are more cumbersome than IEEPA.

Why Did This Happen?

President Trump invoked IEEPA in 2021, claiming an emergency due to the flow of fentanyl and persistent trade deficits. He argued this justified tariffs on imports from nearly all major trading partners. This move has drawn legal challenges, with nearly 1,000 businesses involved in the case, including Costco, Xerox, Puma, Reebok, Bose, Goodyear, and Revlon.

Lower courts have already ruled against the administration, finding that the law does not grant the president authority to impose tariffs. This has led to uncertainty about the future of the tariff policy and its implications for trade and revenue.

How Did Markets React?

Markets have shown volatility in anticipation of the ruling, with investors closely watching for signs of the administration’s contingency plans. Morgan Stanley analysts have noted significant room for nuance in the ruling, including outcomes where existing tariffs are narrowed but not fully unwound.

Financial firms have reportedly purchased tariff refund rights from importers, offering immediate cash in exchange for a share of any eventual reimbursement. This has turned the ruling into a high-stakes financial bet.

What Are Analysts Watching Next?

Analysts are watching for signs of whether the White House will immediately announce tariff backup plans if the Supreme Court rules against Trump. Uncertainty and volatility will follow if those countermeasures take time to implement, the analysts said, which could hurt equity markets even if trade barriers fall.

If the court rules against the administration, it could force the U.S. government to send out an estimated $150 billion in refunds for duties already paid by importers. This scenario could ease inflation pressures and improve corporate profitability while worsening the fiscal outlook.

The ruling could also have broader implications for presidential authority and trade policy, influencing global economic relationships and domestic political debates. As the Supreme Court prepares its decision, businesses, trading partners, and policymakers await clarification on the boundaries of presidential trade authority.