Court ruling on tariffs injects more uncertainty into already volatile US trade policy

A United States Court of Appeals ruling that much of President Donald Trump’s tariff regime is unlawful didn’t create any immediate market waves, if for no other reason than it’s an affirmation of what investors have been living in for most of this year: a world where the rules surrounding cross-border commerce are completely in flux.

“Confusion continues throughout supply chains as courts slowly reduce policy uncertainty but deepen operational indecision,” Kim Wallace, senior managing director at 22V Research, wrote. “Caught between optimism and prudent planning, governments negotiating with the Trump administration, businesses facing constant adjustments, and supply-chain financiers and managers, all operate in a no-guidance environment punctuated by sporadic social media posts.”

Lori Calvasina, chief US equity strategist at RBC Capital Markets, said a number of companies, including Goldman Sachs, Paccar, Hamilton Lane, Movado Group, Bath & Body Works, and Burlington Stores, had flagged the potential for court rulings to inject some additional volatility into the tariff regime over the past two reporting periods.

“We think corporate uncertainty around tariffs will remain elevated, though lower than late spring levels,” Calvasina wrote. “One of our biggest takeaways from 2Q25 reporting season was that companies continued to view the tariff backdrop as dynamic, evolving, and uncertain, despite the general dialing down of tariff levels from those announced April 2nd.”

More uncertainty has its pluses — like the potential for lower costs in the event these tariffs are struck down — and its minuses, like corporate decision-making being hamstrung in the interim.

“It has seemed clear to us, since we heard the President outline his vision in a speech to the financial community a year ago, that tariffs are a core belief of the current administration and we think it makes sense to assume that tariffs, one way or another, are likely to remain a part of the US equity market backdrop for the foreseeable future,” she concluded.

Unfortunately, whether tariffs enacted by the Trump administration as part of the International Emergency Economic Powers Act (IEEPA) run afoul of the law or not may remain an open question for a prolonged period, per George Pollack, senior US policy analyst at Signum Global Advisors.

The most likely scenario, in his view, is that the Supreme Court elects to hear the case but rules in favor of any request by the federal government to keep these levies in place until it makes its final ruling, which he warns could take until the middle of next year. Pollack’s base case is that the nation’s top court will ultimately find that these tariffs were illegal, at which point the administration would need to issue retroactive refunds for tariffs paid.

Angst in US stocks on Tuesday morning appears to be more a function of the weakness in global bond markets. The court’s ruling does introduce some crosscurrents for fixed income: in the short term, the prospect for the end of tariffs could provide inflation relief (good for bonds), but also widen the budget deficit and increase government bond supply in the event that tariff-related revenues disappear (bad). In addition, the removal of this potential economic headwind could give price pressures more staying power rather than a temporary jolt higher, which may also reduce recession risk and the likelihood of interest rate reductions by the Federal Reserve.

Grace Fan, managing director of policy research at TS Lombard, is a little more optimistic on the timeline than Pollack, judging that an eventual Supreme Court decision could come in the next three to six months.

She warns that with the future of IEEPA tariffs up in the air, “Trump will surely double down by tapping other tariff authorities, keeping trade war chaos ongoing in the next few months as tariff winners/losers shift.”

A Supreme Court ruling that IEEPA tariffs are illegal — Fan’s base case — would be a boon to big retailers like Walmart and Amazon, as well as Vietnam and select sectors in Brazil and India, in her view.