Supreme Court Strikes Down Tariffs, But Trump Adds 10% Tax

The Supreme Court’s $100 billion-plus tariff ruling flatly rejected the White House argument, saying that the International Emergency Economic Powers Act “does not authorize the President to impose tariffs.”

President Donald Trump quickly announced plans for a global 10% tax, which he has authority to impose immediately, to replace the tariffs killed by the ruling. The S&P 500 initially extended gains after his announcement, which may be because he had authority to impose a 15% tax.

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								Supreme Court Ruling Strikes Down Trump Tariffs. What's Next For Investors And The Markets.
							

							

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						Supreme Court Ruling Strikes Down Trump Tariffs. What's Next For Investors And The Markets.

The adverse ruling for the White House opened up a hole of well over $100 billion in the annual budget, since the tariffs are, in effect, offsetting part of the cost for the One Big Beautiful Bill Act tax cuts. Refunds may also be due. The ruling, therefore, has important implications for the fiscal deficit, interest rates, Trump’s legislative agenda and potentially the midterm elections.

Few people expected the Supreme Court to go Trump’s way. Oral arguments on Nov. 5 seemed to indicate that a majority of justices thought the White House lacked authority to impose tariffs on a country-by-country basis under the International Emergency Economic Powers Act (IEEPA). Odds on prediction market site Polymarket showed a 27% chance that Trump will prevail.

1:42 p.m. ET

Trump Sets New 10% Global Tariff

President Trump said he will use authority under Section 122 of the Trade Act of 1974 to impose a 10% global tariff on top of other tariffs in place. Section 122 allows the president to impose a tariff as high as 15% but only for 150 days.

The S&P 500 rose 0.5% as Trump spoke, extending more modest gains. The reaction seems to be positive because it still could mean a smaller effective tariff rate than was in place under the tariffs that the Supreme Court struck down.

Some countries such as China and Vietnam currently face 20% tariffs. A 10% rate would raise less, especially if the rate does not apply to specific goods such as steel and auto parts on which Trump has applied other tariffs.

“In the end, I think we’ll take in more money” than under the IEEPA tariffs struck down by the Supreme Court.

Trump cast doubt on refunds, saying they’ll be argued about in court for five years.

Trump said his administration will launch investigations that allow it to replace the 10% tariffs with other tariffs under more permanent authorities. That sounds like the Section 301 process he used against China in his first term. Experts say the process can take nine months.

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1:25 p.m. ET

Trump Bashes Supreme Court

Trump says he’s “ashamed” of certain Supreme Court justices, and praised the dissenters.

However, Trump says there are “even stronger authorities” he can use to impose tariffs than IEEPA.

“Foreign countries that have been ripping us off for years are ecstatic” because of the Supreme Court tariff ruling. But Trump said they won’t be dancing for long.

“Other alternatives will now be used.”

Trump cited some alternative statutes he can rely on. “It’s a little bit longer process,” he acknowledged.

11:37 a.m. ET

Retail Stocks Get A Lift

Amazon (AMZN) rose 1.7% on Friday, leading the Dow Jones Industrial Average, with Home Depot (HD) rising 0.6%. Wayfair (W) rose 4.6% Because markets had already anticipated the tariffs being struck down, the reaction is somewhat muted. Walmart (WMT) continued to pull back, falling 2.6% after giving a softer-than-expected earnings outlook on Thursday.

11:23 a.m. ET

Liberation Day 2.0?

“Call if Liberation Day 2.0 — arguably the first one with tangible upside for U.S. consumers and corporate profitability,” wrote Olu Sonola, head of U.S. economics at Fitch Ratings. He estimates that 60% of the 2025 tariffs go away with the Supreme Court ruling, dropping the effective U.S. tariff rate to 6% from 13%.

However, Trump administration efforts to compensate for the lost tariffs with new ones will create more economic uncertainty, he says.

Mark Malek, chief investment officer of Siebert Financial, called the ruling a “two-sided market event,” noting that tariffs have functioned as a “shadow tax” that funds spending without explicit tax hikes. Removing them is “good for earnings, not exactly comforting for bonds.”

11:15 a.m. ET

Tariff Refunds Fuel For Growth

Joseph Brusuelas, RSM chief economist, posted on X that “it appears lower courts will need to” clarify eligibility for tariff refunds. Still, he expects between $100 billion and $130 billion in refunds. That would be on top of a fiscal tailwind of $100 billion to $150 billion from the One Big Beautiful Bill Act. “We are talking real money,” Brusuelas wrote, “perhaps close to one-quarter of a trillion dollars is possible in the aggregate.”

10:45 a.m. ET

More Supreme Court Tariff Ruling Details

The Supreme Court combined two challenges to Trump’s IEEPA tariffs, also known as reciprocal tariffs. One case brought by two small businesses, including Learning Resources, was heard in federal court. The other case known as V.O.S. Selections, was brought by five small businesses and 12 states in the United States Court of International Trade. The Supreme Court vacated the Learning Resources ruling, essentially saying the case should have been brought in the U.S. Court of International Trade.

However, the Supreme Court simply affirmed the U.S. Circuit Court of Appeals decision upholding most, but not all, of the Court of International Trade (CIT) ruling. The appeals court affirmed the CIT’s rulings that the IEEPA tariffs “exceed the authority delegated to the President” and that the orders to impose them are “invalid as contrary to law.” The one thing the appeals court didn’t agree with is the CIT’s grant of an injunction that would have halted the tariffs within 10 days.

10:22 a.m. ET

Roberts Sees Massive Overreach

Despite “clear and limited delegations, the Government reads IEEPA to give the President power to unilaterally impose unbounded tariffs.” Chief Justice Roberts added: “It is also telling that in IEEPA’s “half century of existence,” no President has invoked the statute to impose any tariffs — let alone tariffs of this magnitude and scope.”

10:18 a.m. ET

S&P 500 Rises On Trump Tariff Ruling

The S&P 500 rose 0.3% in volatile trade following the ruling, reversing from slim losses. The 10-year Treasury yield edged up to 4.10%.

10:15 a.m. ET

Kavanaugh Cites Refund ‘Mess’

In his dissent, Kavanaugh writes, “The United States may be required to refund billions of dollars to importers who paid the IEEPA tariffs, even though some importers may have already passed on costs to consumers or others. As was acknowledged at oral argument, the refund process is likely to be a ‘mess.’”

10:11 a.m. ET

Supreme Court Strikes Down Trump Tariffs Under IEEPA

Chief Justice John Roberts, writing for the majority, said the International Emergency Economic Powers Act “does not authorize the President to impose tariffs.”

Justices Thomas, Alito, and Kavanaugh dissented.

Will Supreme Court Order Refunds?

Costco (COST) is among a host of companies that already filed suit to receive refunds if the court rules the tariffs illegal. Census data through Dec. 14 indicates that $81.7 billion in revenue had been collected from tariffs imposed under the IEEPA. Collections have probably climbed to around $100 billion by now.

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IEEPA-based tariffs include country-specific tariffs, including 20% duties on China and Vietnam. Trump’s authority to impose tariffs on specific types of imports, such as autos and metals, isn’t being challenged. But close to half of the Trump tariffs implemented last year could be thrown out.

Plan B For Trump Tariffs

Tariffs of 15% can be implemented quickly under Section 122 of the Trade Act of 1974 but only 150 days. Further, imports from countries such as China and Vietnam currently face 20% tariffs, so there could be a loss of revenue.

Section 338 of the Tariff Act of 1930 allows up to 50% tariffs, but the authority has never been invoked. To apply, Trump would have to show discriminatory trade practices that “uniquely disadvantage U.S. exporters” and don’t affect other global trading partners, Atlantic Council Associate Director Sophia Busch wrote.

Tariffs imposed under Section 301 of the Trade Act of 1974 have previously been put in place by Trump. But Busch notes that the process “has usually taken at least nine months,” involving public hearings and other steps.

Federal Budget Picture

The Congressional Budget Office’s new 10-year budget outlook is already worrisome, with the federal deficit rising to $3.1 trillion in 2036 as federal debt rises to 120% of GDP. Yet it could be much worse without the projected tariff revenue.

Deutsche Bank’s U.S. economics team says that CBO projections imply tariff revenue will offset 70% of the revenue losses from the One Big Beautiful Bill Act, raising $3.5 trillion over a decade. “Tariffs keep fiscal ship afloat in latest CBO outlook,” Deutsche Bank says.

But there are two potential issues. The first is that Deutsche Bank and other forecasters think CBO is overestimating tariff revenue. “Our own fiscal forecasts assume an effective tariff rate well below the CBO’s — a key reason we expect notably wider deficits.”

If the Supreme Court strikes down the IEEPA tariffs, the suboptimal options for replacing them might further drag down the total.

Resulting budget pressure could dent Trump’s goal of boosting defense spending by $500 billion a year or taking other action, such as tariff rebate, ahead of the midterm elections.

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