Trump’s new 15% tariffs after Supreme Court strike down opens a new era of uncertainty and extended legal battles

By Victor Sperandeo with the Curmudgeon

Introduction:

The Supreme Court’s 6–3 ruling striking down President Trump’s “Liberation Day” tariffs represents a U.S. Constitution reaffirmation of the complete congressional authority over taxation.

Tariffs are a TAX, and all taxes are within the domain of the Legislative Branch of government, as stated in ARTICLE 1 of the U.S. Constitution… the Supreme law of the Land.

The Court’s decision curtails the use of emergency executive authority as a de facto taxing power; shifts focus back to Congress and opens a prolonged period of litigation and refund risk tied to tariffs already collected.

There is now unprecedented policy uncertainty for global trade, corporate planning, and investments. Also, it presents a huge problem for the GOP which must defend unpopular tariffs which the nation’s highest court has nullified.

Hooray! U.S. Constitutional Upheld:

The Supreme Court held that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs, emphasizing that tariffs are an exercise of the taxing power vested in Congress under Article I of the U.S. Constitution. In doing so, the court majority underscored that statutory language permitting the president to “regulate… importation” in emergencies cannot be read as a blank check to levy open-ended duties of “unlimited amount, duration, and scope.”

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Sidebar: The Supremacy Clause

All U.S. laws are governed by “The Supremacy Clause,” found in Article VI, Clause 2 of the U.S. Constitution. It establishes that the U.S. Constitution, federal laws made "in pursuance" of it, and treaties are the "Supreme Law of the Land," overriding any conflicting state laws or constitutions. It binds state judges to prioritize federal law over state laws.

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This important Supreme Court ruling effectively removes IEEPA as a legal foundation for broad, unilateral tariff programs and reinforces the Supremacy Clause principle that all federal statutes must be “pursuant” to the Constitution’s allocation of powers, including the taxing and tariff authority entrusted to the legislative branch. The cross‑ideological 6–3 alignment—three conservative and three liberal justices in the majority—signals that the Court views expansive emergency tariff claims as a structural separation‑of‑powers issue rather than a purely partisan dispute.

Executive Branch Workarounds with Constraints:

Hours after the ruling, Trump responded by imposing a new 10% global tariff—later increased to 15%- under a different legal authority - Section 122 of the Trade Act of 1974 with enhanced use of Sections 232 and 301.

Section 122 permits tariffs of up to roughly 15% to address balance‑of‑payments problems (does the U.S. have one with EVERY country and if so, whose fault is it?), but such measures are time‑limited and require congressional approval for any extension beyond 150 days, constraining their usefulness as a sustained, discretionary tax tool. Thereby, Trump responded with a new 10% global tariff lasting 150 days.

Sections 232 and 301, which address national security and unfair trade practices respectively, remain available but come with procedural guardrails, including investigations and product‑ or sector‑specific findings that make them ill‑suited to the sort of broad, rapidly adjustable global tariffs favored by the administration.

Markets should therefore treat current and future “emergency” tariff announcements with greater legal skepticism, pricing in higher probability that sweeping measures are either time‑bounded or vulnerable to challenge.

Victor’s Opinion: Trump’s latest tariff gambit is an attempt at an “end run” around the CONSTITUTION. However, it is temporary with Congressional approval needed after 150 days. (So Back to Article 1). Yet in 150 days (on 7/21/26), a vote to extend the tariffs (i.e. a tax) would take place only 105 days before the Mid-Term elections.

Who believes Congress will vote a tax and thereby price increases before the November elections? Therefore, this latest Trump proclamation is also going into the dustbin of history. The law prevails and will dictate the future economy.

Tariff Refunds, Litigation Overhang and Corporate Impact:

The Court did not resolve the treatment of the tariffs and related taxes already collected, leaving an estimated pool on the order of more than $130 billion in potential liabilities in legal limbo.

Over 1500 companies have already filed for refunds totaling $170B. However, we think there is little to no chance those requested refunds will be issued.

Thousands of importers are expected to pursue refunds, creating a multi‑year wave of litigation that will tie up capital, elevate legal expenses, and inject additional uncertainty into corporate tax and cash‑flow planning.

Businesses have spent the past year grumbling that America’s constantly changing trade policy has made hiring and investment a nightmare. Any hopes for trade policy calm in 2026 have now been dashed. The Washington Post reported that corporations felt "disoriented," with the reversal creating a "scramble" to re-calculate long-term, business plans.

For companies, the immediate implication is a complex re-calibration of pricing, sourcing, and investment decisions that had been built around the prior tariff regime and its anticipated expansions. With the IEEPA tariffs vacated but replacement measures threatened under other statutes, firms now face a scenario of rolling 150‑day policy windows and recurring political risk, rather than a stable, legislated framework.

Market Reaction and Outlook:

U.S. equities rallied on Friday, with the S&P 500, Dow, and Nasdaq all closing higher after an initial bout of volatility. Cyclical and tariff‑sensitive sectors such as industrials, consumer discretionary, tech, and real estate led performance as investors marked down the probability of further across‑the‑board tariff escalation under emergency powers.

Evidently, the markets have so far treated the Supreme Court’s decision as a modest positive for economic growth while remaining cautious about the durability and shape of President Trump’s “Plan B” tariff framework.

Victor and the Curmudgeon were surprised by the market’s rally on this news, because of the trade policy uncertainty that surely lies ahead.

Despite the relief rally, commentary from market analysts has emphasized that the ruling does not fully remove tariff risk. Rather, it shifts it into a more procedurally constrained channel and introduces new uncertainties around refunds and implementation.

The Court’s decision invalidated IEEPA‑based tariffs but left operational details—such as Customs’ timing to stop collection and the mechanics of duty refunds—to the executive branch and lower courts, raising the prospect of a drawn‑out “legal and bureaucratic quagmire.”

The ruling removed the most aggressive IEEPA‑based tariffs, but the administration’s push to reconstitute similar measures under alternative statutes is limiting how much trade‑policy risk can be priced out of markets.

For equities, that means some of the valuation uplift from lower effective tariff rates is offset by questions about how quickly importers will realize cash from refunds and how replacement measures will be targeted.

For bonds, the ruling nudges the distribution of outcomes toward slightly lower medium‑term inflation risk but keeps a non‑trivial policy‑noise premium in place as trade and supply issues remain a key driver of term premia and break-evens.

Economic Considerations into the 2026–2027 Time Period:

The statutory 150‑day limit under Section 122 implies that any “workaround” tariff package launched now would require congressional action for extension roughly five months later, placing a renewal vote uncomfortably close to the 2026 midterm election calendar. It is politically challenging to envision a Congress willingly casting a high‑profile pre‑election vote to prolong measures that function as consumer and corporate tax increases, which meaningfully reduces the expected durability of such tariffs in their current form.

From a macro-economic perspective, the decision modestly lowers the long‑run probability of ad hoc, executive‑driven tariff shocks while raising near‑term noise as the administration tests the boundaries of remaining authorities. For risk assets, that combination argues for a premium on companies with diversified supply chains and lower direct tariff exposure, as well as for close monitoring of congressional dynamics, where genuine, durable tariff policy will now have to be negotiated rather than decreed.

Governance, Rule of Law, and Investor Confidence:

At a structural level, the ruling is a clear victory for the constitutional separation of powers and reinforces that taxation—and by extension broad tariff policy—requires legislative consent rather than unilateral executive action. For investors, this reassertion of process is ultimately supportive of the rule‑of‑law premium embedded in U.S. assets, even as it creates short‑term uncertainty over refunds, trade relationships, and the design of any future, congressional authorized tariff regime.

“The durability of these policies is very questionable. These are very unpopular; the public doesn’t like them,” said Ed Gresser, who led the Office of the U.S. Trade Representative’s economic research unit during Trump’s first term and is now an analyst with the Progressive Policy Institute.

Indeed, voters oppose the President’s tariffs by a margin of nearly 2-1, 64 percent to 34 percent, according to a new Washington Post-ABC News-Ipsos poll released on Friday.

Market Impact and Positioning:

For investors, the key takeaway is not the complete disappearance of tariff risk but a transition from sudden, executive‑driven shocks to a slower, more legislatively mediated process that may keep overall tariff levels elevated by historical standards.

Such an environment favors companies with diversified supply chains, lower direct import exposure from highly targeted countries or sectors, and balance sheets robust enough to withstand episodic policy gibberish and delayed or denied tariff refunds.

From a tactical standpoint, sectors that were most penalized by IEEPA‑based tariffs—industrial exporters, consumer discretionary names with high import content, and certain tech hardware and machinery plays—stand to benefit if effective tariff rates drift lower or become more predictable under the new framework.

However, the administration’s clear intent to replace, rather than abandon tariffs, creates tremendous uncertainty until the implications of any Section 122/232/301 trade package and Congressional reaction are known.

End Quote:

John Adams, the second U.S. President, famously wrote in a 1798 letter to the Militia of Massachusetts:

"Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other."

Adams argued that only virtue, ethics, and religion could sustain a free republic, as without them, the Constitution could NOT prevent tyranny. It will not ensure freedom and prosperity unless it is supported by a moral, virtuous population.

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Wishing you good health, success, and good luck. Till next time.

The Curmudgeon
ajwdct@gmail.com

Follow the Curmudgeon on Twitter @ajwdct247

Curmudgeon is a retired investment professional. He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996. He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.

Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever-changing and arcane world of markets, economies, and government policies. Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.

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