The U.S. Supreme Court dealt a significant blow to President Donald Trump’s economic agenda by ruling, by a 6 to 3 vote, that he could not use the International Emergency Economic Powers Act of 1977 to impose tariffs on imports.
The ruling disrupts a core economic policy of the administration, and major stock indexes mostly rose after the decision was announced. The Dow Jones, Nasdaq, Russell 2000 and S&P 500 all had modest rallies following the 170-page ruling.
Meanwhile, yields on the 10-year and 30-year U.S. Treasurys rose slightly immediately following the news, perhaps indicating some concern from buyers about the ruling’s impact on the federal deficit—yields tend to rise as prices fall.
During a press conference following the court’s decision, Trump described the ruling as “deeply disappointing.” He added that there are “methods, practices, and statutes and authorities that are even stronger” to deploy tariffs. Trump cited Section 232 of the Trade Expansion Act of 1962, sections of the Trade Act of 1974, and Section 338 of the Tarriff Act of 1930.
Citing the statutes, he said, “effective immediately,” all national security tariffs “remain fully in place, and in full force and effect.” Trump also said he will sign an order later on Friday that imposes a 10% global tariff under Section 122 of the Trade Act of 1974, “over and above our tariffs already being charged.”
Unilateral U.S. tariffs without retaliation typically cause the dollar to strengthen, the introduction of retaliatory tariffs and declining confidence in U.S. markets have ultimately weakened the dollar in the 10 months since the policy was imposed.
For the U.S. economy—and financial markets—the Supreme Court decision is likely to add to the recent trend of uncertainty that has persisted since “Liberation Day,” when Trump first revealed his sweeping tariffs plan in April 2025.
“Call it Liberation Day 2.0—arguably the first one with tangible upside for U.S. consumers and corporate profitability,” said Olu Sonola, head of U.S. economics at Fitch Ratings, in a statement issued after the ruling.
The ruling in Learning Resources v. Trump eliminated more than 60% of the tariffs scheduled, Sonola said. As a result, the U.S. effective tariff rate falls to 6% from approximately 13%, wiping out more than $200 billion in anticipated annual tariff revenue.
Sonola added that the ruling creates “higher tariff-regime uncertainty,” since the odds that tariffs reappear in a revised form remain meaningful. “Layer on potential tariff refunds, and you introduce a messy operational and legal overhang that amplifies economic uncertainty,” Sonola said.
The court did not address the question of tariff refunds, which will now depend on decisions in the lower courts.
Still, the Supreme Court’s ruling was not the only news that pointed to market uncertainty. Key economic news released on Friday included the U.S. gross domestic product, which showed the economy grew at a 1.4% annualized rate in the fourth quarter of 2025, falling short of expectations.
At the same time, the core inflation measured in the Personal Consumption Expenditures Index—the Federal Reserve’s preferred inflation gauge—rose more than anticipated in December 2025, both month-over-month and year-over-year. Year-over-year core inflation, which strips out volatile food and energy prices, came in at 3%, greater than the Fed’s 2% target. Overall GDP growth in 2025 was 2.25%, according to Bureau of Economic Analysis data.
The Federal Reserve’s January meeting minutes, released earlier in the week, also heightened uncertainty, revealing that officials remained divided over the future direction of interest rates. Trump has made clear his desire to see rates cut and nominated Kevin Warsh, a former Fed governor, to succeed current Fed Chair Jerome Powell, who Trump has heavily criticized, even though Trump elevated Powell to chair during the president’s first term.
Some observers have speculated since the Supreme Court’s decision that the elimination of the affected tariffs could reduce inflation and prompt the Fed to cut rates.
Further weighing on the U.S economy and markets are the effects tariffs have had while in place, namely as a revenue source. According to the Tax Foundation, tariffs raised approximately $132 billion in net tax revenue in 2025 and could raise more than $1.6 trillion over the next decade.
“Even if a Democrat prevails in 2028, I am not especially optimistic that they would get rid of all tariffs because they like the revenue,” says Alex Durante, a senior economist at the Tax Foundation.
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Tags: Tariffs, Trump Administration