Supreme Court Strikes Down Trump’s IEEPA Tariffs, Ignites Market Squeeze—and Opens New Trade Front

In a landmark 6–3 decision, the Supreme Court struck down the Trump administration’s sweeping tariffs imposed under the International Emergency Economic Powers Act (IEEPA), ruling that the statute “does not authorize the President to impose tariffs.” The decision was widely expected on legal grounds—but not necessarily on timing. That surprise element hit on options expiration day, when positioning had leaned defensively, and sparked an immediate squeeze higher in equities as bulls pressed their advantage.

Futures popped within seconds of the headline. The S&P 500 reversed earlier weakness and pushed to session highs, while the Nasdaq gained roughly 0.5%. Retail stocks—long viewed as among the most exposed to tariff-related cost pressures—led the charge. Amazon, which sources a large portion of goods from China, rallied sharply. Apparel makers, home improvement chains, and discount retailers joined the move. Industrial names like Caterpillar also clawed back early losses. The squeeze dynamic was amplified by positioning: many traders had braced for volatility into the ruling, and the absence of a worst-case outcome forced short-covering.

But the celebration may prove premature.

Chief Justice John Roberts , writing for the majority, made clear that the Constitution vests tariff authority squarely with Congress. The Court held that IEEPA’s language allowing the president to “regulate … importation” cannot be stretched to include taxation powers. Tariffs, the majority emphasized, are not routine regulatory tools but a core legislative function. The decision leaned heavily on the “major questions” doctrine, requiring clear congressional authorization for actions of vast economic significance. “IEEPA contains no reference to tariffs or duties,” Roberts wrote, adding that no prior president had interpreted it to confer such power.

The dissent , authored by Justice Brett Kavanaugh and joined by Justices Clarence Thomas and Samuel Alito, took a broader view of executive authority. Kavanaugh argued that tariffs are a traditional means of regulating imports and suggested that the ruling may not meaningfully constrain the White House, given alternative statutory pathways. However, he warned that the immediate fallout—particularly the question of refunds—could be substantial and “a mess.”

That refund issue now looms large. The Court was silent on whether importers who paid IEEPA-based tariffs—estimated at over $200 billion—must be reimbursed. If refunds are ordered, the process could unfold company by company, product by product, and potentially through years of litigation. Many importers have already passed on higher costs to consumers. Untangling who ultimately bears those costs will not be simple. The uncertainty alone could weigh on corporate planning and federal revenue assumptions.

Bond markets were less enthusiastic than equities. Yields moved higher following the ruling, reflecting a reassessment of tariff-related revenue flows. Tariffs had been viewed by some fixed-income investors as a quasi-fiscal tightening mechanism—generating revenue and potentially tempering demand. Removing that stream, even temporarily, shifts fiscal math. Investors will be watching closely whether higher yields persist, particularly as growth data remain mixed and inflation sticky.

The White House is unlikely to sit idle. As Kavanaugh noted, multiple alternative statutory avenues remain available. Section 122 of the Trade Act allows the president to impose temporary tariffs to address balance-of-payments concerns. Section 232 permits tariffs on national security grounds—a tool previously used for steel and aluminum. Section 301 enables tariffs in response to unfair trade practices, particularly involving China. In short, while IEEPA-based tariffs are off the table, the broader tariff strategy is not necessarily dismantled. The administration could pivot quickly, though each mechanism carries procedural and legal constraints.

That reality tempers the “all clear” narrative. Markets may have squeezed on the headline, but the underlying trade story remains unresolved. If tariffs reemerge under Section 232 or 301, the economic effects could look similar, albeit on a narrower legal footing. Moreover, the Court’s reliance on the major questions doctrine signals a broader judicial skepticism toward expansive executive power in economic policy—a theme that could resurface in future cases.

In terms of winners and losers, retailers and consumer discretionary names appear immediate beneficiaries, given reduced near-term cost pressure. Import-heavy e-commerce and apparel firms also stand to gain. Conversely, domestic producers shielded by tariffs may face renewed competition. Alternative asset managers tied to private credit—already under scrutiny this week—did not find much relief, as broader macro concerns persist.

The broader market reaction, while positive, was measured. The Dow rose modestly, the S&P 500 added roughly 0.3%, and the Nasdaq extended gains. That restraint reflects two realities: first, the ruling was not a total surprise; second, investors recognize that tariff policy is far from settled.

The Supreme Court delivered a significant constitutional rebuke, reinforcing congressional primacy over taxation. Yet in practical terms, this may represent an intermediate chapter rather than the end of the trade saga. Refund litigation could drag on for years. Replacement tariffs could surface under different statutes. And fiscal implications remain fluid.

For now, traders squeezed higher on relief. But as yields tick up and legal maneuvering begins anew, markets may soon shift from celebration to recalibration.