Supreme Court Delays Ruling on Trump Tariffs, Leaving Markets on Edge

New York: The Supreme Court of the United States on Friday declined to issue a ruling on the legality of broad tariffs imposed by President Donald Trump, prolonging uncertainty over a decision that could have wide-ranging consequences for U.S. trade policy and federal finances.

The delay followed market speculation that the court would rule on the matter this week. However, the court released only one opinion on Friday, which did not address tariffs. The next set of rulings is scheduled for Wednesday, though it remains unclear when the tariff decision will be issued.

At issue is whether the Trump administration had the authority to impose the tariffs under the International Emergency Economic Powers Act (IEEPA), and whether the government would be required to reimburse importers who have already paid the duties if the court rules against the administration.

Legal analysts say the court has several options, including allowing limited use of emergency powers while requiring only partial repayment of tariffs already collected.

Markets await clarity

Financial markets are closely watching the case due to its potential impact on trade flows, inflation, and fiscal revenues. Even if the administration were to lose the case, officials have indicated that other statutory authorities could be used to maintain tariffs without relying on emergency powers.

Treasury Secretary Scott Bessent said on Thursday that he expects a mixed outcome.

“I expect a mishmash,” Bessent said, adding that the administration’s ability to collect tariff revenue is unlikely to be significantly affected. However, he warned that an adverse ruling could limit the president’s flexibility to use tariffs for national security and negotiating leverage.

Trump invoked the IEEPA in part to address the flow of fentanyl into the United States, framing the tariffs as an emergency measure.

Economic implications

Economists say blocking the tariffs could produce mixed economic effects. Jose Torres, senior economist at Interactive Brokers, said the administration would likely seek alternative mechanisms to impose duties.

“Blocking tariffs would be negative for onshoring efforts and fiscal conditions, potentially pushing interest rates higher,” Torres said. “At the same time, it would benefit corporate earnings by lowering input costs and easing trade.”

Prediction market Kalshi currently places the probability of the Supreme Court fully upholding the tariffs at 28 per cent, according to analysts.

Bessent said the administration could rely on provisions of the Trade Act of 1962 to preserve much of the existing tariff framework. However, he cautioned that large-scale reimbursements could complicate efforts to reduce the federal deficit. Treasury data shows tariffs generated approximately $195 billion in fiscal year 2025 and $62 billion in fiscal year 2026 to date.

Scope for a narrow ruling

Analysts at Morgan Stanley said the court has broad discretion and may opt for a limited ruling rather than a sweeping decision.

“There is significant room for nuance,” Morgan Stanley analysts Ariana Salvatore and Bradley Tian said in a note. They said the court could narrow the scope of existing tariffs or restrict their future application without mandating full removal.

So far, the economic impact of the tariffs has diverged from earlier forecasts. Inflation effects have been limited, while the U.S. trade deficit has narrowed sharply. Data shows the trade imbalance fell to its lowest level since 2009 in October, reflecting a decline in imports.

Until the court issues its decision, markets are expected to remain sensitive to developments around trade policy and the administration’s next steps.