Trump’s global tariffs struck down by US Supreme Court

The U.S. Supreme Court has struck down President Donald Trump’s sweeping “Liberation Day” global tariffs, abruptly dismantling a core pillar of his second-term economic strategy.

The decision centered on whether the administration could use the International Emergency Economic Powers Act (IEEPA) to impose across-the-board tariffs of at least 10%—and up to 50% for some countries—on imports from nearly all major trading partners. Lower courts had previously ruled that IEEPA did not authorize such broad, revenue-oriented duties and that the approach raised serious concerns.

The law that underpins those import duties “does not authorize the President to impose tariffs,” the majority ruled, according to CNBC.

Chief Justice John Roberts said Trump "asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration and scope," but that "in light of the breadth, history, and constitutional context of that asserted authority, he must identify clear congressional authorization to exercise it." 

This ruling forces an abrupt reset of U.S. trade policy and removes—at least temporarily—hundreds of billions of dollars in expected tariff revenue that had been partially earmarked to offset tax cuts and fund Trump’s proposed “tariff dividend” for households. 

Importantly, while the ruling specifically targets the use of IEEPA—a law traditionally used for freezing assets or imposing sanctions—as a tool for broad trade taxes, officials have already signaled they may attempt to maintain the tariff framework using other statutes, such as Section 232, which already covers tariffs on steel, aluminum and automotive sectors.

Justices Clarence Thomas, Samuel Alito and Brett Kavanaugh dissented today's ruling and Kavanaugh wrote in his dissent that the refund process “is likely to be a ‘mess,’” after predicting that the short-term impact of the ruling “could be substantial.”

Markets muted

The markets initially reacted positively as stocks gained but overall was muted. Shares of retailers and other companies that were hit hard last year by rising costs lifted. CNBC reported that, as of 11:04am ET, the Dow Jones Industrial Average rose 93.81 points, or 0.2%, recovering from a 200-point loss earlier in the session on disappointing economic data. The S&P 500 traded up 0.3%, while the Nasdaq Composite rose 0.5%.

Shares of “Magnificent Seven” member Amazon jumped 2% following the ruling. Industrial giant Caterpillar reversed earlier losses, rising almost 1%.

Overall, though, markets were largely uninterested because the ruling was largely expected and, crucially, it's not clear that tariffs are going away any time soon.

Jamie Cox, Managing Partner for Harris Financial Group in Richmond, V.A., told InvestmentNews today's events could be more significant for the Federal Reserve. "The Supreme Court decision will pave the way for accelerated rate cuts as inflation expectations from tariffs are now less of a factor. The looming question is what new authority the administration will use to salvage some of the tariff revenue."

And Jeff Buchbinder, Chief Equity Strategist for LPL Financial agreed that expectations of a Fed cut will now rise. "We would fade a short-term bounce on the Supreme Court ruling because the Trump administration will quickly pivot to different legal grounds for replacement tariffs while deficits go higher in the interim. However, if lower tariffs help cool inflation, it could firm up expectations for Fed rate cuts later this year."

Trump 'seething inside'

According to the Wall Street Journal, President Trump had just started a closed-door White House meeting with governors when he found out. He reportedly told those sitting near him that while he looked calm, he was seething inside. He called the ruling a disgrace, the report said.

The President then cut cut short a question-and-answer session with governors and left the room to work on his response to the ruling.