Eliza Wong
The Legal Battle Over Trump’s Tariffs Reaches a Critical Juncture
The question of whether former President Donald Trump’s sweeping tariffs were legally implemented has captured global attention. Recently, Trump attributed brief stock market pullbacks to appellate court rulings against his tariffs, claiming Wall Street actually supports such measures. However, many strategists argue that if the Supreme Court rules against the tariffs—specifically, limiting presidential emergency powers to impose them—US equities could experience a significant rally.
On Tuesday Eastern Time, the Supreme Court agreed to rule on the legality of Trump’s global tariffs and expedited the case. This follows two lower court setbacks, with the latest being the US Court of Appeals for the Federal Circuit supporting the US Court of International Trade’s view that Trump overstepped his authority by using the 1977 International Emergency Economic Powers Act (IEEPA) to justify tariffs.
The Court’s brief notice indicated oral arguments would be scheduled for the first week of November, with many experts anticipating a final decision by year-end.
Potential Market Implications of an Unfavorable Ruling for Tariffs
If the Supreme Court rules that Trump’s tariffs were illegal, the repercussions could be far-reaching for US equities. According to Jeff Schulze, Economic and Market Strategist at ClearBridge Investments, companies that receive tariff refunds would see a substantial boost in profits, acting as a form of economic stimulus.
Schulze added that such an outcome would further bolster his bullish outlook for stocks into 2026.
Refunds as a Stimulus for Corporate Profits
– Tariff refunds could inject up to $100 billion back into businesses, as estimated by TD Bank strategists.
– This amount represents the additional tariffs collected so far in 2025.
– Sectors heavily impacted by tariffs, such as manufacturing and retail, could see immediate margin improvements.
US Treasury Secretary Janet Yellen defended the tariffs in a recent interview, arguing they spurred foreign domestic investment and aided US businesses, the economy, and stocks. However, if the Supreme Court rules against them, roughly half of the tariffs may need refunding, which Yellen described as “terrible for the Treasury.”
Expert Views on Stock Market Trajectory Post-Ruling
Rick Polsinello, Senior Market Strategist at Franklin Templeton Institute, emphasized that the direction of US stocks will heavily depend on the Supreme Court’s decision. He noted that if high tariffs remain, companies with already thin margins would struggle further.
“If the Supreme Court deems Trump’s tariffs illegal, it could be positive news for companies and equities,” Polsinello stated. “But it might also introduce new challenges for bond markets. Much hinges on this ruling.”
Sector-Sensitive Outcomes
– Industrials and consumer goods stocks could rally on reduced input costs.
– Export-oriented sectors might face renewed currency and trade policy uncertainties.
– Bond markets could see volatility as investors reassess fiscal policy and inflation expectations.
Increased Uncertainty and Alternative Legal Avenues
Strategists warn that any legal setback for Trump on tariffs could amplify uncertainty, as businesses and investors await governmental responses. Senior administration officials, including Secretary Yellen, have expressed confidence that the Supreme Court will uphold the use of IEEPA but are prepared to pursue other legal measures if necessary.
One alternative could involve provisions from the 1930 Smoot-Hawley Tariff Act, specifically Section 338, which allows the president to levy tariffs of up to 50% on imports from countries deemed to discriminate against US commerce. This clause, largely dormant for decades, permits rapid tariff implementation.
Navigating a Prolonged Trade Ambiguity
Anthony Saglimbene, Chief Market Strategist at Ameriprise Financial, anticipates a lingering uncertain trade environment for the remainder of the year. “Firms will have to adapt to this reality,” he said, noting that upcoming inflation data may further reflect tariff effects, particularly for producers.
Saglimbene expects the Supreme Court to prioritize the case, given its significance, with a ruling likely before year-end.
Strategic Takeaways for Investors
As the November hearings approach, investors should monitor sectors most sensitive to tariff changes. Companies likely to receive refunds could see earnings upgrades, while those reliant on protectionist measures may face headwinds.
Diversification and hedging strategies may prove prudent amid potential market swings. Historical data suggests that trade policy shifts often create both winners and losers across equities, bonds, and currencies.
Key Considerations for Portfolio Management
– Review exposure to tariff-impacted industries like automotive, technology, and agriculture.
– Assess international revenue streams for US multinationals.
– Stay informed on regulatory updates and central bank responses to potential fiscal changes.
Preparing for the Supreme Court’s Decision
The Supreme Court’s ruling on Trump’s tariffs will be a pivotal moment for markets. A decision against the tariffs could unleash a wave of corporate refunds, boosting profits and equities, but也可能 introduce new uncertainties for fiscal policy and bond markets.
Investors should remain agile, leveraging insights from legal experts and economic indicators to navigate potential outcomes. Engaging with financial advisors and staying updated on court developments will be crucial in the coming months.
Take action now: reassess your portfolio’s vulnerability to trade policy shifts and consider strategies to capitalize on or hedge against the Supreme Court’s impending ruling.
