Supreme Court Strikes Down Trump Tariffs — Markets Rally Before New 10% Levy Clouds Outlook

The Ruling

The U.S. Supreme Court delivered a landmark 6-3 decision on February 20, striking down President Trump's sweeping "reciprocal" tariffs imposed under the International Emergency Economic Powers Act (IEEPA). The majority held that IEEPA does not authorize the president to impose tariffs, reaffirming that the constitutional power to tax rests with Congress.

The ruling invalidated two major categories of duties: country-specific "reciprocal" tariffs — ranging up to 34% on Chinese imports and a 10% baseline on goods from most other nations — and a 25% tariff on select Canadian, Chinese, and Mexican goods tied to fentanyl enforcement. Tariffs imposed on national-security grounds under Section 232, including 50% levies on copper and 25% on semiconductors, remain intact.

Market Reaction

Asset	Close / Level	Change
S&P 500	6,909.51	+0.69%
Nasdaq Composite	22,886.07	+0.90%
Dow Jones	49,625.97	+0.47% (230 pts)
10-Year Treasury	4.083%	+1 bp
30-Year Treasury	4.724%	+2 bps
2-Year Treasury	3.482%	+1 bp

Equities staged a relief rally in the minutes following the ruling. E-commerce names — Wayfair, Amazon, eBay and Etsy — led the charge, while Nike, Target and Home Depot were flagged by analysts as key beneficiaries of lower import costs. The Nasdaq outperformed, lifted by a 4%+ surge in Alphabet and strength in Micron on AI-memory optimism. All three major indices posted weekly gains.

Treasury yields edged modestly higher rather than falling, as bond investors weighed the fiscal implications of lost tariff revenue. The emergency tariffs had been projected to generate roughly $1.4 trillion over a decade; their removal could widen the deficit trajectory.

Trump's Response — A New 10% Global Tariff

Hours after the decision, Trump signed an executive order imposing a new 10% global tariff under Section 122 of the Trade Act of 1974 — the first time this authority has ever been used for this purpose. Key details:

• Effective date: 12:01 a.m. ET, February 24, 2026
• Duration cap: 150 days without Congressional extension
• Revenue impact: roughly $800 billion over a decade, about $600 billion less than the struck-down IEEPA tariffs

Treasury Secretary Scott Bessent indicated the administration would combine Section 122 with enhanced Section 232 and Section 301 actions to offset the revenue gap. Wolfe Research's Tobin Marcus echoed the expectation, noting the tariffs will likely be "reconstituted under other authorities."

Open Questions

The ruling left the refund question unresolved. Companies that paid duties under the now-invalidated IEEPA tariffs may seek reimbursement — the Penn Wharton Budget Model estimates potential refunds of up to $175 billion. Trump signaled he would resist refunds, setting the stage for prolonged litigation.

Outlook

The immediate market read is cautiously positive. Removal of the most aggressive tariff regime reduces a key source of corporate-cost and consumer-price pressure. However, the replacement levy, its uncertain legal durability under Section 122, and the administration's stated intent to escalate through other trade authorities keep uncertainty elevated.

With Q4 GDP slowing to 1.4% amid the prolonged government shutdown, and fiscal-deficit concerns pushing yields higher rather than lower, traders are positioning for a volatile few weeks as the new tariff regime takes effect and refund litigation begins.

Key takeaway: The Supreme Court has reset the trade-policy landscape, but Trump's rapid pivot to alternative authorities means the tariff premium on U.S. markets is reduced — not removed.