Stocks rallied on Friday after the Supreme Court repudiated the signature pillar of President Donald Trump's trade agenda, but the market's relief is likely to be short-lived. Instead, investors should prepare for a new round of economic uncertainty.
In a 6-3 decision, the court said that Trump broke the law by using the International Emergency Economic Powers Act, or IEEPA, to place tariffs on most of America's trading partners. While IEEPA allows the president to limit trade in many ways, the court said, it didn't give the president tariff powers.
Behind almost every public statement and Truth Social post in which he threatened to bludgeon a trading partner, IEEPA was the power that Trump relied on. Now, that authority is gone. But rather than retreat, Trump is doubling down. After railing against the court, Trump announced on Friday afternoon that he would impose a new, 10% global tariff and foreshadowed more to come.
"Foreign countries that have been ripping us off for years are ecstatic, " Trump said. "They're so happy, and they're dancing in the streets, but they won't be dancing for long."
The same could be said of investors. After a volatile day of trading, the S&P 500 index ended the session up 0.7%, to 6909.51. Some tariff-sensitive stocks that initially soared when the decision was announced gave up some or all of their gains by the close. The 10-year Treasury yield rose by a modest 0.01 percentage point to 4.09%.
No matter what Trump does, the tariff decision could have immediate implications for the economy and national debt. Even if the president reinstates most levies, the Treasury might have to refund what it has already collected. A $175 billion refund would benefit corporate margins and equate to a fiscal stimulus of about 0.6% of gross domestic product over coming quarters, according to 22V Research, although some of that will be eaten up by the tariffs that remain.
The Supreme Court offered no path for the refund process, which will probably be a logistical mess.
The White House has argued that the heavy tariffs are needed for national security reasons and to correct a decadeslong trade imbalance resulting from what it says are other countries' unfair trade practices. In 2025, the trade deficit stood at about $901.5 billion, slightly less than its level the previous year. Trump has also touted tariffs as a jobs creator for industries like steel and furniture-making, which have seen production fall sharply over the past few decades in favor of imported goods from countries including Japan and China.
Unlike other tariff authorities, which require investigations that can take months, IEEPA could be implemented immediately, the White House believed, giving Trump a powerful trade tool he could implement just months into his second term. It also gave Trump leverage as his trade advisers negotiated deals with other countries to widen markets for U.S. exporters in exchange for those countries seeing their own levies go down.
Trump and Congress were also counting on tariff revenue to help pay for last year's massive package of tax cuts. If that revenue isn't replaced, the ruling could add more than $2 trillion to the $38.7 trillion national debt over the next decade, according to the Committee for a Responsible Federal Budget.
Trump has several paths to reimpose levies quickly. A law to combat balance-of-trade deficits gives him the ability to impose tariffs of up to 15% for 150 days -- the power he used on Friday. Other authorities meant to combat unfair trade practices or to protect national security are already being used to put heavy levies on imports from China and to protect industries deemed critical to national security, such as steel and aluminum. The Supreme Court decision affects none of those laws.
"Despite the misplaced gloating from Democrats, ill-informed media outlets, and the very people who gutted our industrial base, the Court did not rule against President Trump's tariffs," said Treasury Secretary Scott Bessent in a speech on Friday.
Using the other authorities "will result in virtually unchanged tariff revenue in 2026," Bessent said.
Politically, Trump might not get as much backup from his own party as he does on other issues. Some GOP lawmakers on Friday issued equivocal statements suggesting that the court decision should compel Trump to defer more to Congress on trade policy.
Affordability has been a key weakness for Trump and Republicans ahead of the November midterm elections, with tariffs consistently ranking among the most unpopular of the president's policies. Nearly two-thirds of Americans said they thought tariffs made everyday items less affordable, according to a January poll by the Council on Foreign Relations.
As Trump reimposes tariffs, "Democrats will seize on this and try to make it look like 'Liberation Day 2.0,' " said Beacon Policy Advisors analyst Owen Tedford, alluding to the April 2025 tariff announcement that tanked markets worldwide.
The White House has two choices, says Henrietta Treyz, head of economic policy research at Veda Partners. "Take this gift the SCOTUS just gave them and keep the tariffs off to help curb inflation, or cycle into new and different tariff authorities that will once again increase compliance costs for importers, cause chaos and confusion at the border, and disrupt the harmonized tariff schedule."
Some companies should get at least a short-term boost from potential IEEPA tariff refunds and a temporary reprieve as the old tariffs expire before new ones are put on. Among them are retailers and consumer-facing companies that have high import exposure, including Abercrombie & Fitch, Victoria's Secret, Gap, and Birkenstock Holding, note Jefferies analysts. All four companies held on to their Friday morning gains. The State Street SPDR S&P Retail exchange-traded fund closed 0.7% higher.
Costco Wholesale, Kawasaki Motors, and Revlon, among other companies, have proactively filed claims with the Court of International Trade in a bid to receive IEEPA tariff refunds. Other companies hoping to follow in their footsteps will have to do the same, and it will take time for lower courts and Customs and Border Protection to sort those requests out, said Brett Johnson, a partner at Snell & Wilmer , a law firm.
Those refunds aren't a given, either. Trump suggested in his news conference on Friday that the administration might decide to fight the refunds in court, a process that would take years.
The problem for investors and companies who hope the tariff battle is over is simple: Trump loves tariffs -- often going so far as to say in speeches that "tariff" is among his favorite words. One adverse court ruling won't change that.
