Markets could face near-term volatility in the wake of the Supreme Court’s decision to strike down tariffs levied under the Emergency Economic Powers Act (IEEPA). The ruling creates a complex landscape as markets adapt to multiple unresolved issues, including raised global tariffs, investigations and potential refunds.

Overview of the ruling

The Supreme Court ruled 6-3 that the administration's use of IEEPA to impose country-level tariffs was unlawful, a ruling that was overall directionally consistent with market expectations but went further than expected in overturning all the IEEPA tariffs.

Unresolved was the issue of potentially refunding an estimated $175 billion in tariff revenue, which was kicked down to a lower court. The process for firms to receive tariff refunds will be lengthy and challenging, with litigants needing to bring individual cases or participate in class action versus automatic refunds.

Also unaddressed was the administration’s strategy to reverse engineer the tariffs through alternative tariff authorities, including the subsequently announced 15% global tariff through Section 122 and Section 301 investigations, which could make way for more durable tariffs. These alternative authorities come with varying procedural, timing and rate‑related constraints, which introduce potential variability to tariff rates in the interim.

The litigation did not challenge sectoral tariffs, including autos, steel and aluminum, because they were crafted under a different legal basis, known as Section 232. Thus, the sectoral tariffs can remain in place. 

Ultimately, despite the near-term uncertainty and potential volatility, the long-term outcome remains unchanged: Tariffs are here to stay, and previously negotiated deals are likely to remain in place. 

However, bearing in mind widespread voter discontent with tariffs in a midterm election year, Raymond James Chief Investment Officer Larry Adam expects future tariff decisions will be milder than last year's. “There are already signs of some walk-backs, and the Supreme Court decision provides another opportunity for an off-ramp,” Adam said. “While it’s too early to revisit our corporate earnings and GDP growth assumptions for 2026, there could be slight upside to both.”

Corporate earnings

While there are individual examples of US companies that directly benefit from tariffs – steel mills and solar panel manufacturers, for example – corporate America is mostly opposed to protectionism. Any reduction in tariffs – whether from trade deals, unilateral White House decisions or legal action – is, broadly speaking, welcome news for companies and positive for corporate earnings.

Earnings in 2025 ultimately came in much better than the pessimistic predictions at the time of the trade war’s peak in April and May. Corporate America’s adaptation to tariffs – comprising flexible supply chain management, internal cost efficiencies and price hikes – has been, on the whole, successful. The benefit from lower tariffs will vary from sector to sector and even from company to company.

The US economy

As the weighted average tariff rate ramped up last year to its highest levels since the 1930s, the US economy proved resilient, but there was no avoiding negative effects. Tariffs slowed GDP growth and stoked inflation in goods. Weaker hiring, depressed consumer confidence and a decline in the US dollar were among the consequences.

A milder tariff policy could spur a pickup in hiring. Inflation is also expected to subside, driven by the approximately two-thirds of the Consumer Price Index basket that is services rather than goods. Could lower tariffs lead to lower goods prices? That appears unlikely. If companies see lower tariff costs, they are expected not to reverse last year’s price hikes. Goods prices would likely stay the same and companies would instead pocket the savings in the form of higher margins. This would be good news for shareholders, but status quo for consumers.

From a fiscal policy standpoint, any reduction in the Treasury’s tariff revenue would widen the federal budget deficit, all else being equal. Tariffs provide a meaningful revenue source as the current run-rate of tariff revenue is around $30 billion per month, or $360 billion on an annualized basis. For context, the aggregate budget deficit was $1.7 trillion in calendar 2025.

Bottom line

The Supreme Court’s tariff ruling may introduce near‑term volatility as markets react to the legal and policy uncertainty, but it doesn’t alter the outcomes: Tariffs will remain a central feature of US policy. With midterm elections approaching, however, future tariff decisions could be mild relative to 2025. While it’s too early to calculate, there could be slight upside to corporate earnings and GDP growth assumptions for 2026.

All expressions of opinion reflect the judgment of the author(s) and are subject to change. This information should not be construed as a recommendation. The content provided herein is for informational purposes only. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results.

Source: FactSet