Supreme Court Kills Trump’s Tariffs—So He Unleashes a 15% “Tariff Bomb” Instead

The Supreme Court’s decision to strike down the Trump administration’s use of the International Emergency Economic Powers Act (IEEPA) for a large swath of tariffs briefly looked like the cleanest “risk-on” catalyst the market had seen in weeks. Investors interpreted the ruling as a potential de-escalation: lower effective import taxes, less inflation pressure over the next 12 months, and a modest growth tailwind as real purchasing power improves. That relief trade didn’t last. Within hours, the White House moved to “backfill” the lost tariff authority, first floating a blanket rate under a different statute and then escalating it: a 15% global tariff under Section 122, which (crucially) is time-limited to 150 days unless Congress renews or replaces it.

Markets opened Monday with that whiplash front and center. U.S. equity futures were in the red across the board (S&P down ~0.48%, Dow ~0.47%, Nasdaq ~0.61%, Russell 2000 down ~0.66%), though S&P futures bounced off their overnight lows. The message from price action was straightforward: the court removed one tool, but it didn’t remove the policy objective, and uncertainty is a tax that compounds daily. Volatility reflected the same vibe, with the VIX back above 20, while defensive hedges caught a bid (gold up ~0.8% and silver up sharply). Treasuries were comparatively steady and Fed pricing didn’t move much, which tells you the market is treating this as a policy/earnings-multiple problem first, not a “rates panic” problem.

What actually changed after the ruling is the composition of winners and losers, not the existence of them. A 15% flat-rate structure reduces trade-weighted average tariffs the most for countries that were previously hit hardest: Brazil and China see the largest implied reductions (Brazil by roughly 13.6 percentage points and China by about 7.1), with meaningful relief also implied for India, Canada, Mexico, and several Asian manufacturing hubs such as Vietnam, Thailand, and Malaysia. In contrast, long-standing U.S. allies appear to take a relative hit under the new regime, including the UK (the biggest loser), Italy, France, and the broader EU, with smaller but still negative changes for Japan and parts of northern Europe. That’s the uncomfortable punchline: the “flat” tariff ends up reshuffling the burden in ways that can benefit prior targets and pressure prior partners.

At the sector level, the same analysis highlights a clear set of “relative winners” under a flat rate. Categories that were carrying very high tariff burdens under the prior regime—knitted apparel, iron/steel articles, furniture/lighting, toys/games/sports, and a range of machinery and plastics—see lower implied tariff rates under the 15% structure than under the previous regime. In other words, for a lot of consumer goods and broad manufacturing inputs, a uniform 15% can be less punitive than a patchwork of much higher effective rates. By contrast, categories that had been relatively spared (or benefited from exemptions) can see less improvement—or even a relative disadvantage—once the system is flattened and exemptions get contested or narrowed. For U.S. markets , the practical takeaway is that “tariffs” won’t trade as one factor: it will trade through supply chains, category exposures, and who has pricing power.

So what are the next steps markets should watch? First is the clock. Section 122’s 150-day window is not a footnote; it’s the entire ballgame. It creates a “known unknown” for late summer: either tariffs are renewed, replaced, or superseded by more targeted authorities. Second is the pipeline of investigations. The administration is signaling Section 301 and Section 232 probes that can justify more durable, product- or country-specific tariffs, but those processes are slower and more procedurally constrained than IEEPA. That time lag matters for markets: it extends uncertainty, but it also limits how quickly the White House can recreate the old regime in full.

Third is refunds, which is where legal clarity becomes operational chaos. Many importers are now stuck asking whether refunds are automatic, whether they require litigation, and how long cash recovery might take. Businesses have already started financial engineering around it (selling refund claims to hedge funds, for example), which tells you companies view the process as neither swift nor certain. If refunds bog down into multi-quarter litigation, the “stimulus” impulse of the court decision becomes a slow drip rather than a jolt.

Fourth is the geopolitical overlay. Oil dipped on reporting that the U.S. and Iran may push for diplomacy later this week, but the situation is fluid. If crude spikes, tariff-driven goods inflation becomes part of a broader inflation story again, and the Fed’s flexibility shrinks.

Tomorrow’s State of the Union address is the near-term headline risk. The market will listen for three things: whether Trump frames the 15% tariff as temporary “bridge authority” pending investigations (a softer message for risk assets), whether he escalates rhetoric toward specific partners (raising the odds of targeted follow-ons), and whether he signals any willingness to work with Congress on a longer-lasting framework. The base case is he emphasizes leverage, fairness, and urgency, likely presenting the flat tariff as a necessary response to deficits and as a negotiating tool rather than an end state. If he pairs that with threats of additional sector tariffs (autos, industrial capacity, strategic inputs), equities likely stay cautious and leadership narrows further.

The bull case is that the Supreme Court ruling still nudges the effective tariff burden lower than it was before the decision, even with the 15% blanket, and that the 150-day limit forces a de facto moderation into midterms. Bulls also argue that tariffs are not the whole narrative: AI capex, ongoing fiscal impulse, and resilient corporate balance sheets can absorb a lot of trade noise, especially if housing disinflation continues and tariff-related inflation proves transitory. In that frame, Monday’s weakness is a sentiment shakeout, not a regime change.

The bear case is that uncertainty is now the policy. A tariff tool was removed and immediately replaced, first at 10% and then 15%, and markets have to price the possibility of more backfills via 301/232 plus messy refunds. That raises the risk premium, pressures margins for firms without pricing power, and extends the window where companies delay capex or hiring because they can’t underwrite input costs. Bears also worry about fiscal arithmetic: if tariff revenue becomes a political priority, the incentive to keep some form of broad import tax stays high, even if the legal mechanism changes.

Bottom line: the court ruling mattered, but it didn’t end the tariff story—it restarted it under a new rulebook with a shorter fuse. Monday’s weaker equity tone is the market admitting it doesn’t know the rules of the road, and it doesn’t like driving in fog.