The most conservative Supreme Court justices will likely join the liberals against Trump’s tariffs, analyst says

Analysts predict the Supreme Court is poised to strike down President Trump's global tariffs imposed under the International Emergency Emergency Powers Act (IEEPA), potentially by a significant margin, due to concerns among justices regarding executive overreach and the separation of powers. While this ruling would eliminate one set of duties, experts caution that it would not end Trump's broader trade war, as he retains other legal avenues, such as the Trade Expansion Act, to implement tariffs. Consequently, trade uncertainty is expected to persist, with potential implications for economic growth, as alternative legal routes, though less flexible, could still maintain high effective tariff rates.

Analysis

The Supreme Court appears poised to strike down President Trump's global tariffs imposed under the International Emergency Powers Act (IEEPA), following arguments heard this week. Analyst James Lucier of Capital Alpha Partners predicts a significant majority, potentially 7-2 or 5-4, will rule against the administration. This anticipated decision stems from concerns among justices, including conservatives like Neil Gorsuch and Amy Coney Barrett, regarding executive overreach and the separation of powers.

During arguments, the administration's lawyer conceded that their legal reasoning could enable future presidents to declare emergencies for broad policy actions, such as blocking gasoline car imports for climate reasons. The solicitor general also admitted Americans bear part of the tariff costs, contradicting previous White House claims of revenue generation. This highlights the court's focus on the constitutional boundaries of presidential authority in trade policy.

Despite a potential Supreme Court defeat on IEEPA tariffs, the broader trade war and associated uncertainty are expected to persist. Christopher Hodge of Natixis CIB Americas notes that President Trump retains other legal avenues, such as the Trade Expansion Act, to impose duties, albeit with less flexibility. These alternative routes could still maintain high effective tariff rates, prolonging trade tensions and impacting growth prospects through 2026.

Key Decisions for Investors

• Investors should assess the potential unwinding of IEEPA-based tariffs on specific sectors or companies, which could alleviate cost pressures or improve supply chain stability for affected imports.
• Monitor the administration's utilization of alternative trade authorities, such as the Trade Expansion Act, as continued tariff threats are anticipated to maintain trade policy uncertainty through 2026.
• Evaluate companies with significant international supply chain exposure or reliance on imported goods for their resilience to persistent trade tensions and potential shifts in tariff application.