The US Supreme Court ruled 6–3 that the International Emergency Economic Powers Act (IEEPA) does not let a President impose tariffs. The Court left it to lower courts to decide whether more than $160 billion in paid tariffs must be refunded. The decision slightly reduces overall US tariff levels, but tariffs are still historically high. The Trump administration moved quickly to restore tariffs using other legal tools.

Tariff Refunds And Fiscal Effects

If courts order refunds, they would raise this year’s deficit. Even so, the long-term debt outlook is not expected to change much. Forecasts already assumed tariffs would fall this year—and that drop has now happened. Inflation effects should be small. Even if companies get refunds, they are unlikely to pass that money on to consumers. Section 122 could be used again, but it only lasts 150 days and could face legal challenges. Those cases likely would not be resolved before the 150 days end. Section 122 was originally meant to deal with international payment problems under fixed exchange rates. The administration is also expected to use Section 232 and Section 301 to rebuild tariffs after new investigations. These tools cannot recreate broad, universal tariffs, but over time they could rebuild something close to the previous package.

Trading Implications And Sector Volatility

The Supreme Court’s decision to limit presidential tariff powers has changed the trading environment. It moves markets away from broad, predictable tariffs and toward more targeted and uncertain actions. The administration is now rebuilding tariffs step by step, which creates uneven risks across sectors. In this setting, we favor trading volatility rather than making simple, market-wide directional bets. Traders should watch sectors often targeted under Sections 232 and 301, such as steel, aluminum, and Chinese technology imports. As new investigations begin, implied volatility could rise in ETFs tied to these areas, including the industrial sector SPDR (XLI). That may make volatility strategies—such as buying straddles or strangles on key industrial and tech names—more attractive as uncertainty increases. We do not view this as a major disinflation shock that would change Federal Reserve policy. The latest Consumer Price Index showed a 0.4% monthly increase in January 2026, keeping annual inflation above 3%. Any refunds paid to businesses are also unlikely to reach consumers. For that reason, options trades that rely on aggressive Fed rate cuts because of this tariff news look poorly positioned. The possibility that more than $160 billion in tariff refunds could be paid out this year creates a clear fiscal risk. It could widen the projected deficit, which the CBO already put at more than $1.7 trillion for fiscal year 2026. That could be a headwind for US Treasuries. It may also add volatility in currency markets, especially the US dollar versus the Chinese yuan. Section 122 would allow broad tariffs for a limited 150-day window while longer-term measures are investigated. Because legal challenges are unlikely to conclude before it expires, traders should expect short-term market disruptions when Section 122 is used. This creates a defined period when hedging currency exposure or certain commodity futures may become more important. Create your live VT Markets account and start trading now.

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