The US Supreme Court is expected to issue a landmark ruling on Friday on the validity of tariffs implemented by President Donald Trump, a move that could have a major impact on the country’s trade policy and fiscal position.
Although there has been no official confirmation that a decision will be announced, the Supreme Court has set Friday as “Opinion Day,” sparking market expectations that the tariff issue will be among the major cases decided.
Essentially, the court’s ruling will focus on two main issues, namely whether the Trump administration has the right to use the International Emergency Economic Powers Act (IEEPA) to impose tariffs, and whether the US government must refund tariff duties paid by importers if the use of the authority is found to be illegal.
However, analysts expect the court’s decision to be less than black and white.
The court has the room to limit the scope of IEEPA or only mandate limited refunds, without overturning the entire existing tariff structure.
At the same time, the US administration still has other legislative options to keep tariffs in place, including through provisions under the Trade Act of 1962, even without using emergency powers.
The implications of losing tariffs are seen as mixed. Restrictions on tariffs could potentially weaken the US government’s fiscal position and put pressure on interest rates, but could also support corporate earnings, lower input costs and smooth global trade.
Markets currently do not appear to be pricing in a full Trump victory.
Data from forecasting platforms show a low probability that the courts will fully side with the tariffs as they have been implemented previously.
From a fiscal perspective, tariffs have been a significant source of revenue for the US government, with collections estimated to reach $195 billion in fiscal year 2025 and an additional $62 billion in 2026.
Any repayment obligations risk undermining the administration’s efforts to reduce the deficit.
Analysts see the Supreme Court's decision as potentially more cautious, including narrowing the scope of tariffs or limiting their future use, in line with the current political focus on the cost of living issue.
So far, the impact of tariffs on the US economy has been more modest than initially expected.
Inflationary pressures remain contained, while the trade deficit has narrowed significantly, with the trade imbalance reaching its lowest level since the end of the global financial crisis in 2009.
