Research Analyst
While tariff news has been at bay in recent weeks, another wave may be rolling in. On November 5th, the Supreme Court heard the first oral arguments on the case challenging President Trump’s authority to implement tariffs under the International Emergency Economic Powers Act (IEEPA). Political strategists see a 70% chance the tariffs are struck down before year-end1.
If the IEEPA tariffs are ruled illegal, the average statutory tariff rate would drop to 10.4% from the current 16.1%. This would be especially good news for countries like India, Brazil and Switzerland, where IEEPA tariffs make up most of their current rates. However, the administration is expected to act quickly to implement other tariffs under different authorities. As a result, the ruling will probably have very little impact on overall tariffs and could trigger another cycle of announcements, increasing uncertainty and keeping markets on their toes.
The administration is weighing the use of the following powers:
- Section 122, Trade Act of 1974: Raise tariffs to 15% on one or more countries for 150 days due to trade imbalances, but Congress has to approve any extensions. This is likely to be implemented immediately if SCOTUS strikes down the use of IEEPA.
- Section 338, Trade Act of 1930: Impose tariffs of up to 50% for “unfair practices,” but immediate legal action is expected, and breadth is uncertain.
- Section 301, Trade Act of 1974: Target specific countries for unfair or discriminatory practices (e.g., China tariffs in first term); only works for narrowly imposed tariffs.
- Section 232, Trade Act of 1962: Impose tariffs or quotas if there are national security threats; requires an investigation within 270 days along with a review period. Typically used for sectoral tariffs.
Apart from the legal outcome itself, two key questions remain: refunds and the fiscal outlook. A ruling in favor of the plaintiffs means that approximately $140B of the $174B total tariff revenue raised through mid-October 2025 would be eligible for refunds. However, only the companies directly involved in the court cases would likely see them, if at all. Others may not want to take a legal stand against the administration or might not be able to afford the legal fees. According to our calculations, the tariffs added this year are expected to offset U.S. budget deficits by $3.7 trillion over the next 10 years, almost completely offsetting the cost of the ‘One Big Beautiful Bill’ (assuming stable imports). While the announcement could place upward pressure on long yields in the short term, the fiscal outlook is largely unchanged since the administration is expected to replace the tariffs swiftly.
For equities, a relief rally (on top of the current rally) is possible, but the duration is uncertain as more tariffs likely get added. Tariff-sensitive companies have already underperformed the broader market by 7.5% since the election. Businesses also may second-guess new investments or hiring decisions while they take time to understand the scope and sectors most impacted. For investors, short-term volatility may pick up, but secular trends can continue to drive markets.