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February 24, 2026

Tariff Ruling Fallout

The Supreme Court dealt the Trump administration and its tariff agenda a formidable legal setback last Friday. In a 6–3 decision, the court held that Trump did not have the specific legal authority to impose tariffs that he claimed he did.

The decision, which narrowly focused on the use of the International Emergency Economic Powers Act (IEEPA), does not end tariffs altogether. It does, however, force the White House to shift legal tactics.

Markets were not blindsided. Betting market coverage on Polymarket, for example, had been pricing the administration’s odds well below one-third for months.

The immediate equity market reaction on Friday was mild relief: stocks rose after the decision. Investors generally prefer free trade and worry about the potential for trade wars to escalate.

Then, over the weekend, Trump said he would raise the new global import surcharge from 10% to 15%.

Stocks ended the day lower on Monday, with the S&P 500 declining approximately 1%. Tariff uncertainty appeared to play a role, although ongoing concerns around AI impacts on the economy may have been the bigger factor.

Overall, we view the market’s muted reaction to the tariff drama as rational—and a good sign that we have moved beyond the tariff obsession.

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As we discussed back in mid-December (Stocks Rise on Lower Inflation as Tariff Fears Subside), the overall impact of tariffs has been wildly exaggerated by many.

The April 2025 stock market sell-off was, in retrospect, an excellent buying opportunity. In our view, much of the hysteria at that time was fueled by financial media animosity to Trump.

Mainstream media amplified the viewpoints of politically aligned economists like former Treasury Secretary Larry Summers, who sought to paint tariffs as a catastrophic policy error that would simultaneously lead to depression, inflation, and a market crash.

Of course, none of these dire forecasts came to fruition, despite the subsquent imposition of sizeable tariffs. Growth has been robust, inflation has fallen, and stocks have risen.

The rule of law continues

There is an additional element of Trump’s reaction to the decision that is a clear market positive.

Trump has been accused of executive overreach—with many of his critics casually using terms like “dictator,” “autocrat,” “authoritarian,” or worse.

A likely worst case scenario for markets would be if Trump simply ignored the Supreme Court ruling, which could have created a Constitutional crisis. Instead, he is respecting the decision even if he disagrees with it and is going back to the drawing board.

Like almost every President before him, Trump has in some cases tested the limits of his executive authority. When the Supreme Court says he has gone too far, for better or worse, he complains… but recalibrates.

To be clear, this was not a black-and-white case. At a minimum, the administration was acting on a plausible interpretation of the law. Justices Clarence Thomas, Samuel Alito and Brett Kavanaugh all sided with the administration and produced strong dissenting opinions.

Putting tariffs in perspective

Tariffs are real. They can dent margins, reshuffle supply chains, and create pockets of inflationary pressure. But at the macroeconomic level, we see three structural reasons that tariffs are less impactful than headlines may suggest….

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