Scott Bessent has ‘got a feeling’ that $175 billion raised under the IEEPA is lost to the American people for good

The Supreme Court ruled the administration could not use the IEEPA to impose global tariffs, putting roughly $164.7 billion of collections (Penn Wharton projects up to ~$175 billion in potential refunds) into protracted litigation and making consumer-facing tariff rebates unlikely, according to Treasury Secretary Scott Bessent. The White House has invoked Section 122 to enforce a temporary 15% levy for 150 days while exploring other authorities (Section 232/301); analysts (Yale Budget Lab, Deutsche Bank) expect the effective tariff rate and related revenue to trend lower in 2026, and UBS warns any rebates would raise the fiscal deficit and are unlikely to be passed through to consumers.

Analysis

Market structure: The Supreme Court ruling injects legal uncertainty that immediately favors large global importers and consumer-facing retailers (WMT, COST, AMZN) because up to ~$175bn of IEEPA collections (≈$500m/day, $164.7bn by Jan‑2026) are disputed and the federal government is unlikely to redistribute quickly. Short‑lived enforcement under Section 122 (15% for 150 days) limits immediate upside for protected domestic producers (NUE, X), and consensus forecasts (Yale/Deutsche) imply effective tariff rates normalizing toward ~9–11% in 2026 vs 16.9% with IEEPA—a meaningful input‑cost disinflationary impulse for import‑heavy sectors over quarters.

Risk assessment: Tail risks include a pivot to targeted Section 301/232 tariffs (high‑impact, sectoral) or protracted litigation stretching years and creating episodic volatility; worst‑case could be fragmented bilateral tariffs raising supply‑chain costs and input inflation. Time horizons: expect days of FX and equity volatility, weeks–months of legal clarity and potential carve‑outs, and quarters of real margin compression or expansion depending on whether effective tariffs settle below ~11%. Hidden dependencies: corporate pricing power, seller concentration, and inventory cycles will determine whether importers pass savings to consumers or retain margin.

Trade implications: Favor long exposure to large, low‑margin importers/retailers and select consumer staples (WMT, COST, TGT) over domestic commodity/steel names (NUE, X); consider duration extension (TLT) if market prices a sustained disinflation (look for CPI down 20–40bps). Volatility spikes around court rulings and administrative decisions create opportunities for short‑dated option structures: buy 1–3 month call spreads on retailers and buy 3–6 month puts on steel producers instead of naked shorts to limit risk.

Contrarian angles: Market may underprice the fiscal angle—if refunds are paid it’s a one‑off fiscal stimulus that could lift consumption for 1–2 quarters and push yields up; conversely, aggressive re‑imposition under different statutes would concentrate downside in global supply‑chain names. Historical analog: 1970s tariff shocks showed transient protection for domestic producers but longer‑term consumer benefits from lower trade barriers; position sizing should be tactical (2–3% per idea) and conditional on concrete legal catalysts within 30–150 days.

Key Decisions for Investors

• Establish a 2–3% long position in Walmart (WMT) and Costco (COST) equity or equivalent 3‑month call spreads (buy 2–3% OTM, sell 6–8% OTM) to capture lower effective tariffs over the next 3–12 months; trim if customs duty data shows effective rate >11% for two consecutive weeks.
• Initiate a 1–2% short exposure to U.S. steel producers (NUE, X) via 3–6 month buy‑puts or inverse ETFs; pair this with the WMT/COST longs (1:1 notional) to express relative margin compression as tariffs ease.
• Allocate 2–4% to duration (buy TLT or 10yr futures) conditional on a 20–40bps drop in CPI or a 30‑day decline in 5y5y inflation swaps; reduce if administration announces durable Section 301/232 tariffs targeting metals or autos.
• Purchase 1–1.5% notional of 1–3 month straddles (or call spreads) on AMZN or large import‑dependent retailers ahead of expected judicial/administrative updates to capture event volatility; exit within 7–14 days post‑ruling or on 50% premium decay.