Summary
The Supreme Court struck down Trump’s use of emergency powers to impose broad tariffs, calling the move unlawful. Markets remain calm as investors expect alternative legal frameworks to replace them. While equities trade flat, traders are watching inflation expectations, bond yields, and sector rotation for clues on whether this remains a headline event or evolves into a structural shift.
Market Watch
Economic Data
📚 Deep Dive 📚
Supreme Court Strikes Down Trump Tariffs — What It Means for Markets
This morning, the Supreme Court ruled 6–3 that President Trump’s use of the 1977 International Emergency Economic Powers Act (IEEPA) to impose broad tariffs was not lawful.
In a 170-page decision, the Court stated:
“IEEPA does not authorize the President to impose tariffs.”
The tariffs in question made up roughly half of the tariff measures implemented, including the “reciprocal” tariffs imposed on multiple trading partners, as well as tariffs on China, Canada, and Mexico tied to fentanyl enforcement claims.
The administration is appealing lower court rulings, and the President has already stated that an adverse ruling would be a “terrible blow” to the United States.
However — and this is important — this does not mean tariffs disappear.
What Could Happen Next
According to market commentary from Deutsche Bank and Goldman Sachs:
- Sector-specific tariffs such as steel and aluminum are not covered by this ruling.
- The administration could pursue Section 122 of the 1974 Trade Act, which allows temporary 15% tariffs for up to 150 days.
- Alternative legal frameworks are highly likely.
Goldman summarized it well:
This won’t be the end of tariffs. The administration will almost certainly roll out alternative legal frameworks.
Their takeaway:
- Possibly fewer tariffs overall
- More trade uncertainty
- Incremental deficit concerns
- Mildly supportive for equities
- Mildly negative for bonds
- Largely priced in
Market Reaction So Far
As of February 20, 10:00 AM, markets are trading sideways on the news.
No panic.
No breakout.
No disorder.
Which tells you something important.
The market either:
- Expected this outcome, or
- Believes tariffs will return under another legal structure
Right now, price action suggests this is not a systemic shock.
What We’re Watching
From a trading standpoint, the key questions are:
- Does this reduce inflation expectations?
- Does it shift bond yields meaningfully?
- Does it impact sector rotation (industrials, materials, exporters)?
- Does it change earnings outlooks in a durable way?
If tariffs are replaced under a new framework, this becomes more about headline volatility than structural change.
If they are materially reduced without replacement, we could see:
- A marginal tailwind for multinational equities
- Some easing in trade-sensitive sectors
- Slight downward pressure on long-term inflation expectations
For now, none of that is confirmed.
Bottom Line
This is a legal shift — not necessarily a policy reversal.
Markets are calm.
Equities are flat.
Bonds are steady.
We remain vigilant and will adjust positioning if this evolves beyond a headline event.
Pricing is imperfect.
Policy is fluid.
Adaptation is required.
We’ll update you as further developments unfold.
— GAR Capital
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