The Legal and Economic Risks of Trump's Tariffs and Their Impact on Retail and Import-Dependent Sectors

The legal and economic landscape surrounding President Trump's 2018–2020 import tariffs has reached a critical juncture, with far-reaching implications for investors, particularly in retail and import-dependent sectors. As the U.S. Supreme Court prepares to rule on the constitutionality of these tariffs under the International Emergency Economic Powers Act (IEEPA), the potential for a reversal-and the subsequent refund wave-has become a focal point for market participants. This analysis examines the legal risks, economic costs, and investment implications of a possible shift in policy.

Legal Uncertainty and the Path to Reversal

The Trump administration's use of IEEPA to justify tariffs on over 100 countries has faced sustained legal challenges. Lower courts, including the U.S. Court of International Trade and the Federal Circuit, have ruled that IEEPA does not authorize the imposition of tariffs, a stance the administration has contested in the Supreme Court according to congressional reports. The consolidated case Trump v. V.O.S. Selections and Learning Resources v. Trump centers on whether the executive branch overstepped its authority by treating tariffs as regulatory measures rather than taxes according to legal analysis.

Recent developments suggest the Court is leaning toward limiting executive power. In late 2025, justices reportedly questioned the administration's interpretation of IEEPA, with some justices emphasizing the need for explicit congressional approval for such sweeping trade actions according to a New York Times report. If the Court rules against the administration, the tariffs could be invalidated retroactively, triggering a complex refund process for businesses that paid them. Major retailers like Costco, Bumble Bee Foods, and Revlon have already filed lawsuits to preserve their right to reclaim these payments according to a Newsweek report.

Economic Costs: A Fiscal and Market Burden

The economic toll of Trump's tariffs has been profound. By 2025, the average effective tariff rate on imports had surged to 15.8%, the highest since 1943, with an average household tax burden of $1,100 annually according to tax foundation data. These tariffs have driven up consumer prices, with short-term inflationary effects equivalent to a $3,800 loss per household in 2024 dollars according to Yale budget lab research.

Long-term economic consequences are equally dire. Studies estimate that the tariffs could reduce U.S. GDP by 0.7% when accounting for foreign retaliation and efficiency losses according to tax foundation research. The regressive nature of these policies further exacerbates inequality, as lower-income households bear a disproportionate share of the cost according to Yale budget lab research. Meanwhile, the revenue generated-$1.2 trillion from IEEPA tariffs alone-has proven insufficient to offset the $3.4 trillion cost of the 2025 tax cuts, creating a fiscal imbalance that critics label "fiscal folly" according to CEPR analysis.

Investment Implications: Navigating the Refund Wave

For investors, the potential reversal of these tariffs introduces both risks and opportunities. A Supreme Court ruling in favor of the plaintiffs could trigger a massive refund wave, with the government facing billions in payouts to affected businesses. This scenario would likely benefit import-dependent sectors, including retail, manufacturing, and logistics, by reducing operational costs and restoring price competitiveness. However, the uncertainty surrounding the timeline and scope of refunds could create short-term volatility.

Conversely, a ruling upholding the tariffs would cement their economic drag, perpetuating higher costs for consumers and businesses. Retailers like Costco, which have already invested in legal battles to secure refunds, may face stranded costs if the tariffs remain in place according to a Newsweek report. Additionally, prolonged legal battles could erode investor confidence in the stability of U.S. trade policy, deterring long-term capital allocation to import-heavy industries.

The balance of power between the executive and legislative branches is another critical factor. A reversal could signal a broader shift in how Congress and the courts constrain executive authority, potentially leading to more predictable trade policies in the future. For now, however, the lack of clarity remains a headwind for strategic planning.

Conclusion: A High-Stakes Legal and Economic Crossroads

The Supreme Court's decision on Trump's tariffs represents a pivotal moment for U.S. trade policy and market dynamics. From a legal standpoint, the case tests the boundaries of executive power, with implications for future administrations. Economically, the tariffs have imposed significant costs on households and businesses, while the potential for refunds introduces a wildcard for investors.

For import-dependent sectors, the coming months will be defined by uncertainty. Investors must weigh the short-term benefits of a refund wave against the long-term risks of policy instability. As the Court deliberates, the key takeaway is clear: the interplay of legal and economic forces will shape the trajectory of U.S. trade policy-and with it, the fortunes of industries reliant on global supply chains.