Our thoughts on US Supreme Court ruling

Highlights: The US Supreme Court ruled 6–3 that President Trump could not use the International Emergency Economic Powers Act (IEEPA) of 1977, but the administration will continue tariff policy under alternative statutory powers. Using section 122, a new 10 per cent global tariff was announced on Friday but already changed to 15 per cent on Saturday. This comes on top of existing measures and will remain in place for up to 150 days. The ruling, and the administration’s quick reaction using other powers, were largely expected by markets, limiting the market reaction. We could see a small increase in bond yields if markets worry about lower fiscal revenues. USD could be slightly weaker on positive global sentiment. 

• While the measures under IEEPA were struck down, existing national security tariffs under Section 232 (Trade Expansion Act of 1962) and China-related tariffs under Section 301 (Trade Act of 1974) remain fully intact. New Section 301 investigations are being initiated
• Treasury officials indicated that total tariff revenue in 2026 is expected to remain virtually unchanged, suggesting policy continuity despite the Court’s ruling
• Section 122 authority is time-limited, meaning there are three options thereafter: transition into expanded Section 232 (product level) or 301 (country level) actions, or congressional involvement to extend the Section 122 measure before expiration
• Prior estimates suggested that up to USD170 billion in tariff revenue could potentially be subject to refund claims, though actual payments would depend on final legal outcomes and administrative guidance, will take a lot of time and may be limited to firms that litigated
• The financial market reaction was muted but constructive so far, particularly in import-reliant sectors such as retail, consumer discretionary, autos, and select industrials, reflecting lower near-term cost pressures and reduced legal uncertainty. For fixed income and FX, the effects are more nuanced. Lower effective import taxes may ease goods inflation at the margin over time, modestly supportive for bonds, while reduced trade tension offers limited near-term support to risk sentiment. Positive sentiment outside of the US points to mild USD weakness
• In summary, the ruling narrows the legal pathway for sweeping tariffs but does not signal a structural retreat from tariff use in US trade policy