In a blow to one of President Donald Trump's signature policies, the Supreme Court struck down a significant portion of the administration's tariffs, imposed on nearly all major U.S. trading partners.
On April 2 of last year, which Trump dubbed "Liberation Day," the 47th President imposed high tariffs, stunning investors and triggering a near-instant bear market. A lot has happened since that time. Trump has delayed or reversed some of the tariffs and reached trade deals with many countries. The market has bounced back significantly following "Liberation Day" and went on to enjoy strong performance in 2025.
Official White House photo by Joyce N. Boghosian.
The Trump administration imposed many of its tariffs under the International Emergency Economic Powers Act (IEEPA), which essentially gives the President broad authority over financial transactions after declaring a national emergency.
In its 6-3 ruling, the Supreme Court noted that IEEPA does not specifically mention tariffs. Furthermore, as CNBC reported, the Supreme Court stated that Trump must "point to clear congressional authorization" for the tariffs. "He cannot."
Interestingly, the court's ruling did not address whether levies collected under the tariffs would need to be refunded, although Supreme Court Justice Brett Kavanaugh in his dissent, stated that "the refund process is likely going to be a 'mess.'" Reuters reported that economists from the University of Pennsylvania's Wharton Budget Model have estimated that the U.S. might have to refund over $175 billion in tariffs.
While it's still early, here's how this ruling could impact the stock market.
There are many unknowns, but some things to consider
Trump's tariffs were part of a broader policy plan by his administration. For instance, Trump's other signature legislation, the One Big Beautiful Act, passed by Congress last year, is expected to add $4.7 trillion to U.S. national debt by 2035, according to the Congressional Budget Office (CBO).
But this was supposed to be largely offset by the tariffs, with the CBO projecting that they would lower debt by $3 trillion through 2035. The U.S. Department of Homeland Security reported collecting $287 billion in customs duties, taxes, and fees in 2025, up 192% from 2024.
Now, Trump has already said he has a "backup plan" for tariffs, so it's possible that they will continue. But if they don't, that will likely bring the "bond vigilantes" out, who are concerned about U.S. debt and the country's broader financial situation. This group tends to push up U.S. Treasury bond yields to account for higher risk. Higher bond yields have been problematic for the market in recent years.
A potentially positive impact if the tariffs go away is that inflation would likely fall, as tariffs tend to push up domestic consumer prices. While consumer prices fell at the start of 2025, following "Liberation Day" in April, the Consumer Price Index (CPI) shot up from a low of 2.3% to a high of 3%.
The CPI has retreated, but many are concerned that recent data is not accurate due to disruptions caused by the prolonged government shutdown toward the end of last year.
US Consumer Price Index YoY data by YCharts
Ultimately, I don't think anyone knows the immediate impact of the Supreme Court's decision, given the uncertainty over refunds and Trump's backup plan. This is likely to add uncertainty to the market as investors try to figure out what tariff rates could look like going forward.
