Supreme Court’s Prolonged Tariff Decision Delay Favors President Trump

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President Donald Trump announced yesterday his intention to impose new tariffs. He also warned of catastrophic consequences if the U.S. Supreme Court were to declare his existing tariff orders unlawful. The president estimated that “many Hundreds of Billions of Dollars” or even “Trillions” would be at risk if the government were compelled to reimburse those who had paid them.

“It would be a complete mess, and almost impossible for our Country to pay,” he stated. “If the Supreme Court rules against the United States of America on this National Security bonanza, WE’RE SCREWED!”

The court could deliver its decision as early as Wednesday, having been expected to rule last week. The reason for the delay remains unclear.

However, Wall Street analysts are growing more optimistic about the ruling. Many suggest that as time progresses, the tariff issue becomes less critical. Furthermore, within the broader macroeconomic context, the tariffs are proving less impactful than initially anticipated.

According to JPMorgan, the longer the ruling is delayed, the more probable it is that the court is leaning in Trump’s favor.

“Legal experts continue to expect the Supreme Court to rule against the use of emergency powers [under the International Emergency Economic Powers Act] to authorize tariffs, but note that each week the Supreme Court delays its decision increases the likelihood of the Trump administration prevailing,” JPMorgan analysts Amy Ho and Joyce Chang informed their clients. “Historically, SCOTUS reserves its most impactful decisions for the end of its term in June, which allows for extended deliberation.” They added that both Supreme Court cases concerning the Affordable Care Act were deferred until June.

The analysts also highlighted that in the underlying case, only $135 billion in potential tariff refunds are at stake.

While Trump has promoted tariffs as a means to reduce the $38 trillion national debt, the reality is that collections thus far have been too modest to have a significant effect, according to James Knightley, ING’s chief international economist in the U.S. “Since April, tariff revenues are up $206 billion in those eight months relative to [fiscal] 2024, but not all are the IEEPA tariffs—they are estimated to perhaps be $130 billion. Sounds a lot, but the U.S. is a $30 trillion-plus economy,” he conveyed in an email.

“Many companies will be wary of drawing the ire of the president by claiming a refund and the hoops to jump through to reclaim through the courts could be quite onerous and deter others. Hence the actual amount that is reclaimed may be quite a lot less than $130 billion.”

Moreover, he stated that even if Trump loses the Supreme Court case, he would likely reimpose the tariffs through alternative regulations. “Given tariffs are a signature policy and the Republican polling isn’t looking very strong right now ahead of the midterms, the administration will move swiftly to reinstate tariffs through other legally recognized routes. The promise of a $2,000 tariff dividend needs to be paid for somehow. This is merely shuffling money around seeing as Americans paid the tariffs in the first place only to get money returned, so it is difficult to argue this will be a major stimulus for the economy,” he concluded.

Tariff revenue is currently being generated at a rate of $30.4 billion per month, equating to an annualized rate of $364.5 billion, according to Bloomberg data provided via Pantheon Macroeconomics. However, these revenues are already declining as companies discover workarounds and as Trump himself negotiates deals, compromises, or postpones the implementation of harsher measures.

Convera analyst Antonio Ruggiero also remains unconcerned by the upcoming ruling. If the tariffs are deemed illegal, “we expect the immediate [foreign currency exchange] reaction to be limited, as the broader consensus is that alternative mechanisms will be found to keep tariff revenues intact.”

“That said, in the medium term, we cannot exclude the possibility of mild bearish pressure on the dollar tied to expectations of further uncertainty and erratic trade maneuvers should the administration be forced to remove such tariffs, particularly at a time when USD sentiment is increasingly fragile amid concerns over Federal Reserve independence,” he advised clients in an email.

Here’s a snapshot of the markets ahead of the opening bell in New York this morning:

  • S&P 500 futures were down 0.15% this morning. The last session closed up 0.16%.
  • STOXX Europe 600 was flat in early trading.
  • The U.K.’s FTSE 100 was up 0.05% in early trading.
  • Japan’s Nikkei 225 was up 3.1%.
  • China’s CSI 300 was down 0.6%.
  • The South Korea KOSPI was up 1.47%.
  • India’s NIFTY 50 was down 0.25%.
  • Bitcoin was at $92K.