The US Supreme Court could rule as early as Friday on the legality of President Donald Trump’s sweeping tariffs, a decision that could reshape US trade policy, federal revenues and the balance of power between Congress and the White House.
The case centres on whether the administration lawfully used the International Emergency Economic Powers Act (IEEPA) to impose tariffs on imports from nearly all major trading partners. Lower courts have already ruled against the administration, finding that the law does not grant the president authority to impose tariffs, which have traditionally been the domain of Congress.
Friday is scheduled as a Supreme Court “decision day”, though the court does not announce in advance which rulings it will release. Legal observers nonetheless see the tariff case as a strong candidate for inclusion.
What the court is deciding
At issue are two core questions: whether IEEPA can be used to justify tariffs at all, and if not, whether importers must be reimbursed for duties already paid. The court also has wide latitude to land somewhere in between, potentially narrowing the scope of the tariffs without ordering full removal or full refunds.
Treasury Secretary Scott Bessent has warned investors to expect a fragmented outcome.
“What is not in doubt is our ability to continue collecting tariffs at roughly the same level, in terms of overall revenues,” Bessent said this week. “What is in doubt … is the president loses flexibility to use tariffs both for national security [and] negotiating leverage.”
Trump has argued the tariffs were justified under IEEPA as an emergency response to issues including fentanyl inflows and persistent trade deficits.
Fiscal and market implications
Tariffs have become a meaningful source of government revenue. Treasury data shows they generated about US$195bn in fiscal 2025 and a further US$62bn in 2026 to date. Bessent has cautioned that large-scale reimbursements could complicate efforts to reduce the federal deficit.
Economists say the economic effects of losing the tariffs would be mixed. Jose Torres, senior economist at Interactive Brokers, said blocking the tariffs would likely weaken onshoring efforts and put upward pressure on bond yields, but could support corporate earnings by lowering input costs and smoothing trade flows.
“Blocking tariffs would be bad for fiscal conditions,” Torres said. “But it would be good for corporate earnings.”
Prediction market Kalshi currently assigns roughly a 28% probability that the court fully upholds the tariffs as implemented.
Refunds and legal fallout
Hundreds of companies have already filed lawsuits in the US Court of International Trade, seeking refunds if the Supreme Court rules the tariffs unlawful. More than 1,000 businesses are named across the cases, including major retailers and manufacturers such as Costco, Reebok, Xerox, Goodyear and Dole.
Some financial firms have reportedly purchased tariff refund rights from importers, offering immediate cash in exchange for a share of any eventual reimbursement, effectively turning the ruling into a high-stakes financial bet.
US Customs and Border Protection has meanwhile set a February 6 deadline for importers to register for electronic refunds under its new Automated Commercial Environment system, which would be used to process repayments if ordered by the courts.
What happens if Trump loses
Even if the Supreme Court strikes down the tariffs under IEEPA, the administration has signalled it would pursue alternative legal avenues, including provisions under the Trade Expansion Act of 1962, though officials acknowledge those mechanisms are more cumbersome.
Morgan Stanley analysts have said there is “significant room for nuance” in the ruling, including outcomes where existing tariffs are narrowed but not fully unwound.
For now, markets are bracing for uncertainty rather than clarity. The tariff regime has so far defied many predictions, with limited inflationary impact and a sharp narrowing in the US trade deficit to its lowest level since 2009.
Whether that record holds may depend on what the Supreme Court decides — and how aggressively the White House responds if it does not get the answer it wants
