Evan P. from Austin, TX asks: Hi Mitch, I’ve been following the Supreme Court hearings on the Trump administration’s tariffs and how the justices seemed skeptical about their legality. If these tariffs are struck down, could that have a major impact on markets, or on overall trade policy and the economy? I would think it could be a bullish event…
Mitch’s Response:
Thanks for writing, Evan. This case is arguably one of the more consequential ones we’ve seen at the Supreme Court in some time, in terms of economic policy. I think your early read on the case is correct, too, as questioning from the justices suggests they’re skeptical about how far presidential authority can stretch when it comes to trade.
For readers who have not been following this issue closely, the Supreme Court case centers on whether the president can impose sweeping tariffs under the International Emergency Economic Powers Act (IEEPA), a law that doesn’t actually mention the word tariff but does allow the president to “regulate trade” in a national emergency.
Lower courts have already ruled that tariffs enacted under this statute are unconstitutional, because tariffs are taxes. And the Constitution grants taxing authority to Congress, not the executive branch.
Several justices, from both sides of the ideological spectrum, seemed skeptical of the Trump administration’s argument. Chief Justice John Roberts described tariffs as a “major authority” that implicates Congress’s power of the purse. Justice Neil Gorsuch called the ability to “reach into the pockets of the American people” one of the defining limits on presidential power since the country’s founding.1
More Tariff Uncertainties. What Does This Mean for Your Portfolio?
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To be clear, this isn’t a referendum on whether tariffs are good or bad economic policy, but rather whether the White House overstepped in invoking emergency powers to enact them. As you point out in your question, however, the outcome could reshape the legal foundation of the administration’s broader trade agenda, which is a key feature of its economic policy. A ruling would limit the ability of future presidents to impose tariffs unilaterally.
From a market perspective, I don’t think this case offers the kind of surprise power that would have been a big deal for markets a year ago. Much of the uncertainty surrounding tariffs has already been priced in, in my view. If the Court upholds the tariffs, we effectively maintain the status quo—an imperfect but well-known backdrop that markets have already adapted to. If the Court strikes them down, there could be a brief adjustment period as the government determines how to unwind or replace the current structure. But even then, we suspect the reaction would be modest and short-lived.
Markets tend to prefer clarity to ambiguity, and the Supreme Court’s deliberations, covered extensively in the press, have already brought some clarity. Investors are now openly weighing all possible outcomes, which limits the element of surprise that usually fuels volatility.
For the economy itself, tariffs have been a headwind but not a knockout blow. They’ve introduced friction in global supply chains and raised costs for some businesses, but companies and consumers have largely adapted through workarounds, exemptions, and shifts in sourcing. Even if the Court were to invalidate large portions of the tariff structure, the economic effect would likely be incremental, not transformational.
In my view, the legal stakes here are higher than the market stakes. The case will clarify where presidential power ends and congressional authority begins—a question that could shape future trade and tax policy for years. But markets, as they often do, have already looked past the immediate drama and started to price the eventual resolution.
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