Trump’s battle brings more uncertainty to tariffs and markets, advisors say

President Donald Trump’s mounting clash with the Supreme Court over tariffs looks set to cast a shadow over the markets, say advisors. 

The Supreme Court has drawn Trump’s ire after it struck down the President’s wide-ranging global tariffs in a ruling Friday. The 6-3 decision is seen as a blow to the sweeping tariffs agenda that Trump unveiled last year. In a post on his Truth Social network Saturday, Trump blasted the Court’s “extraordinarily anti-American” decision and said he is hiking global tariffs to 15% from 10%. “During the next short number of months, the Trump Administration will determine and issue the new and legally permissible Tariffs, which will continue our extraordinarily successful process of Making America Great Again,” he said.

Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management notes that Trump’s 15% global tariff on almost all imports is through an under-the-radar law known as Section 122 of the Trade Act of 1974. “This adds a new layer of uncertainty to the tariff story,” he said, in a statement. “The tariff is allowed to stay in place for 150 days under this law before Congress must step in.”

“The big question for the economy is what happens after this window, and if the tariff policy stays down this path, we may very well be back at the Supreme Court later this year,” Landsberg added. “The push and pull with tariffs is likely to be a distracting theme for markets for the remainder of the year, albeit with less volatility than the initial shock last April.”

"As for the trade ruling, uncertainty is back," David Wagner, head of equity and portfolio manager at Aptus Capital Advisors, told InvestmentNews. "From an economic perspective, uncertainty means delays more than anything else. Uncertainty early last year delayed business investment and hiring. However, this uncertainty is significantly less than last year's. Tariffs are still in place is the main takeaway."

Markets reacted to the latest twist in the tariffs saga Monday, with the S&P 500 Index (SPX) ending the session down 1% and the Dow Jones Industrial Average (DJI) down 1.7%. The Nasdaq Composite (IXIC) shed 1.1%.

Set against this backdrop, Trump’s State of the Union address on Tuesday could assume even more importance, according to Landsberg. “While State of the Union speeches generally don't move markets, Tuesday's speech may take on greater importance given Friday's Supreme Court decision, as the President may reveal more details on how he may still impose tariffs through other means, although those options are very unclear,” he said.

Last year Trump imposed extensive tariffs under the International Emergency Economic Powers Act, which sparked the Supreme Court's decision. However, the administration can also harness the so-called Section 301 of the Trade Act of 1974, a trade tool that gives the Office of the United States Trade Representative authority to impose tariffs. Several Section 301 investigations are underway.

Jeff Buchbinder, chief equity strategist at LPL Financial, thinks that tariff rates will end up landing within a point or two of where they were with IEEPA tariffs after the Section 301 investigations are completed and the 5-month life of the Section 122 tariffs ends. "High single digit average U.S. tariff rates should be quite manageable for markets and preserve important revenue for the U.S. Treasury going forward," he told InvestmentNews. "At the same time, trade policy uncertainty remains high as the issue of refunds will take time to play out in the courts and prior negotiated agreements come into question."

The reverberations from Trump’s latest tariffs move are being felt around the world. The president’s decision to raise tariffs to 15% prompted a sharp reaction from European policymakers. “A deal is a deal,” said the European Commission in a statement released Saturday. “As the United States' largest trading partner, the EU expects the U.S. to honour its commitments.”

China’s Ministry of Commerce said it is conducting a “comprehensive assessment” of the Supreme Court’s ruling and its impact, according to the country’s Xinhua state news agency. China urges the U.S. to cancel its unilateral tariff measures on its trading partners, the Ministry added. Tariffs have been a source of long-standing source of tension between the U.S. and China. Trump will travel to China next month for a planned summit with Chinese leader Xi Jinping, marking the first trip to the country by a U.S. president since Trump’s 2017 visit.