The Supreme Court Rules Against Trump’s Tariffs

Uncategorized – February 23, 2026

In a highly anticipated ruling last Friday morning, the Supreme Court (SCOTUS) ruled 6-3 that President Trump overstepped his authority by using a 1977 emergency powers law (IEEPA) to impose broad global tariffs on imports from nearly every country.

SCOTUS said tariffs are basically taxes, and in normal circumstances, only Congress has the authority to impose them, not the president acting alone. The Court’s decision knocks out most of the wide-reaching tariffs from 2025, but leaves other specific ones in place (such as those on steel and aluminum, for security reasons or unfair practices from China).

With SCOTUS’ announcement coming out just days ahead of President Trump’s State of the Union speech, set for tomorrow night (Tuesday), he hit back quickly. In a press conference on Friday, Trump called the ruling “deeply disappointing” and announced a new temporary 10% tariff on imports from almost everywhere (using a different old trade law, Section 122, which lasts up to 150 days). Then on Saturday, Trump upped the new tariff to 15%. For many countries, even the 15% is lower than the previous rates on their imports, so it’s short-term relief. The exception is China, where existing tough tariffs stay unchanged and could even rise.

Now the big headline – and headache – is refunds. The government collected $140 billion to $200 billion from the now-illegal tariffs. Businesses may be fighting in court for years to get money back, creating uncertainty surrounding the refunds, international trade, and the federal deficit, which would rise if the government must refund the tariffs it collected. Even so, markets liked the SCOTUS announcement overall. Stocks rose modestly on Friday because the decision dials back some extreme trade-war risks and eases fears of big price hikes or profit hits for companies. Still, the new 15% blanket tariff adds some costs, and more twists could come, so keep an eye open for further developments.

Markets Often Get Ahead of Themselves – And Then Catch Their Breath

There’s an old Wall Street saying: “The market has predicted eight of the last four recessions.” It’s a reminder that investors can get overly pessimistic and call economic downturns that never arrive. (By the way, the same is true about them getting overly optimistic.)

A common pattern during economic expansions shows a meaningful correction (a 10%+ drop) occurring about halfway through the growth cycle. Why? Stock markets are essentially forward-looking “derivatives” of the economy – so they don’t move in perfect lockstep with it. Markets tend to run ahead, get overbought (too many buyers pushing prices too high, too fast), and then pull back to reset valuations, shake out weak hands, and re-position for the next ride up.

Historically, this creates two distinct tactical market cycles within one longer economic cycle:
• A strong first half run-up, followed by
• A correction in the middle of the economic expansion – to clear overbought conditions
• Then a powerful “second wind” rally, often bigger and broader than the first phase