Explained: How the US Supreme Court’s Trump tariffs verdict could reshape trade policy, markets

The US Supreme Court is poised to rule on one of the most consequential trade cases in recent years: the legality of tariffs imposed by President Donald Trump using emergency powers. While the verdict may hinge on technical legal questions, its impact could ripple across global trade, US fiscal policy, markets, and corporate earnings. Here’s what’s at stake — and what different outcomes could mean. 

What is the court deciding? 

At the heart of the case are two closely linked questions: 

1. Can the White House legally use emergency powers to impose tariffs? 

The Trump administration relied on the International Emergency Economic Powers Act (IEEPA) to justify tariffs, framing them as a national security response — partly tied to halting fentanyl inflows into the U.S. The court will decide whether this law actually grants the president such broad tariff authority. 

2. If the tariffs are ruled illegal, does the government owe refunds? 

If the court finds the use of IEEPA improper, it must also decide whether importers, who already paid billions of dollars in duties are entitled to reimbursement. Crucially, the ruling does not have to be all-or-nothing. The court could narrow the scope of the emergency powers, limit repayment obligations, or restrict how tariffs can be used in the future without fully dismantling the current regime. 

Why markets are watching closely 

The case has drawn intense attention from Wall Street because of its potential knock-on effects: 

• Fiscal impact: Tariffs generated about $195 billion in fiscal 2025 and another $62 billion in 2026, according to Treasury data. Any mandated refunds could strain efforts to reduce the fiscal deficit. 
• Interest rates: Economists warn that losing tariff revenue could worsen fiscal conditions, potentially pushing rates higher. 
• Corporate earnings: On the flip side, blocking tariffs could lower input costs for companies and smooth global trade, boosting margins. 

What happens if the administration loses? 

Even a loss may not mean the end of Trump-era tariffs. Treasury Secretary Scott Bessent has already signalled that the White House has other legal tools at its disposal, particularly under the 1962 Trade Act, to keep most tariffs in place without invoking emergency powers. 

That’s why Bessent expects a “mishmash” outcome — one that limits presidential flexibility but does not dramatically reduce overall tariff revenues. 

Prediction markets like Kalshi currently assign only a 28% probability that the court will fully uphold the tariffs as implemented, suggesting investors are bracing for a partial rollback rather than a clean win for the administration. 

Why this ruling goes beyond trade 

Beyond tariffs themselves, the case could reshape how future presidents use emergency powers for economic policy. 

A restrictive ruling would: 

• Curb the president’s ability to deploy tariffs as a negotiating or national security tool 
• Increase congressional oversight over trade actions 
• Set boundaries on how far emergency laws can stretch into economic governance 

At the same time, analysts at Morgan Stanley note the court has “significant room for nuance”, including options that preserve much of the current tariff structure while narrowing its legal foundation. 

Tariffs haven’t played out as expected 

Interestingly, the economic impact of the tariffs has defied early predictions: 

• Inflation has remained muted, despite fears of rising consumer prices 
• The US trade deficit has fallen sharply, hitting its lowest level since 2009 in October 

That performance has complicated the narrative that tariffs would isolate the US or severely hurt consumers making the court’s decision even more consequential for future policy debates. 

The Supreme Court’s ruling could redefine how far presidential power extends in trade policy — without necessarily dismantling the tariff wall itself. Whether through refunds, revised legal authority, or alternative trade laws, the decision is likely to reshape the rules of the game rather than end it outright. 

Stock benchmarks Sensex and Nifty took their losing run to the fifth straight session on January 9 amid concerns over likely stalling of the India-US trade deal and amid fears over a likely fresh 500 per cent tariff on countries like India, which buys Russian oil. Stock investors were also cautious ahead of the US Supreme Court verdict on the legality of Trump tariffs. At 1.02 pm, the BSE Sensex was trading at 83,568.13, down 612.83 points or 0.73 per cent. Nifty fell 181 points or 0.71 per cent to 25,689.25.