The Longer the Supreme Court Delays Its Tariff Decision, the Better It Is for President Trump

The U.S. Supreme Court did not issue a ruling on the legality of President Donald Trump's tariffs on January 13, keeping investors in a state of uncertainty. The decision is expected to have a major impact on trade policy and the U.S. fiscal outlook.

The court is scheduled to hold another opinion day on January 14, but the delay has not significantly reduced market concern. Jim Baird of Plante Moran Financial Advisors noted that while the market may not react as strongly as it did to the April 2 "liberation day" tariffs, the outcome will still affect fiscal and trade policy.

A ruling in favor of Trump would support the use of emergency powers under the International Emergency Economic Powers Act (IEEPA) to impose tariffs. That would provide legal clarity for similar future actions and potentially ease concerns about refund obligations.

Why Did This Happen?

The Supreme Court's continued delay may reflect internal deliberations or strategic timing of a major ruling. Historically, the court tends to issue high-impact decisions toward the end of its term, allowing for extended review.

JPMorgan analysts suggest that each week the court delays its decision increases the likelihood of Trump prevailing. This trend has been observed in past landmark cases, such as those involving the Affordable Care Act.

How Did Markets React?

The S&P 500 has been volatile in the run-up to the ruling. As of January 10, it traded near 6,902.04, down 0.28% on the day. Analysts expect further volatility as the ruling draws closer, especially if it creates uncertainty around trade policy and fiscal obligations.

If the court rules against Trump, import costs for U.S. businesses could fall, potentially benefiting equity markets. However, that would also mean the U.S. government could face significant refund obligations. The Department of Justice has indicated that refunds would apply to all IEEPA-based tariffs, including those on goods from India and Brazil.

What Are Analysts Watching Next?

Analysts are closely monitoring the Treasury's capacity to manage any refund obligations. While the Treasury has signaled that it can fund refunds, the speed and clarity of those payments will influence market reactions.

James St. Aubin of Ocean Park Asset Management expects a potential rally in equities if the ruling strikes down Trump's tariffs. This is based on the expectation that improved profit margins and reduced cost burdens could drive higher stock prices.

Canadian investors are also watching closely. A ruling that reduces U.S. import costs could benefit cross-border businesses, particularly in the auto and retail sectors. However, analysts suggest a cautious approach, recommending liquidity management and careful positioning until the ruling is finalized.

The ruling will also have implications for U.S. fiscal policy. If Trump loses, he may attempt to reimpose tariffs through alternative legal mechanisms, according to ING's James Knightley. This would preserve the economic impact of tariffs while addressing legal concerns.

The U.S. Treasury is expected to play a key role in managing the transition if the ruling invalidates the current tariff framework. Refund procedures and timing will be critical in determining the speed of market adjustment.

For now, investors are advised to maintain a balanced risk profile and to avoid concentrated exposure to outcomes based on a single ruling. The delay in the Supreme Court's decision provides time for market participants to prepare for multiple scenarios.