A game of tariff whack-a-mole could diminish the impact of the Supreme Court’s ruling overturning Trump’s tariffs.
Ding dong, the tariffs are dead. At least, some of them are.
The U.S. Supreme Court handed down a monumental decision on Friday, striking down President Trump’s tariffs under the International Emergency Economic Powers Act (IEEPA). In a 6-3 ruling, the high court determined that Trump exceeded his authority in levying tariffs under the legislation.
Major stock market indexes opened in negative territory on Friday amid concerns about higher-than-expected inflation figures. Both indexes jumped, though, when the news about the Supreme Court’s decision broke.
However, investors shouldn’t celebrate too much. I predict that the stock market surge following the Supreme Court’s smackdown of Trump’s tariffs will be short-lived.
Image source: Getty Images.
Why investors initially celebrated
It isn’t surprising in the least that the S&P 500 (^GSPC +0.69%) and the Dow Jones Industrial Average (^DJI +0.47%) spiked immediately after the Supreme Court decision. As UPS (UPS +0.94%) Carol Tomé explained in her company’s July 2025 quarterly update, “Tariffs are not good for trade.” And many U.S. companies’ fortunes are interwined with international trade.
U.S. companies that import products have been faced with a lose-lose proposition. They could either absorb the higher tariffs’ costs or pass them along to customers. The former approach directly reduces profits, while the latter could depress sales.
The Supreme Court ruling also opens the door for companies to recover the money they have paid to the U.S. government for Trump’s overturned tariffs. Although the decision didn’t provide specific guidance on refunds, many businesses are likely to seek a refund. This could lead to a stimulus of around $175 billion.
Investors could also hope that the removal of IEEPA-based tariffs will cool inflationary pressures and increase the likelihood that the Federal Reserve lowers interest rates further. Lower rates could turbocharge the stock market’s momentum.
Tariff whack-a-mole
But any momentum won’t last long, in my opinion. Justice Brett Kavanaugh, one of the three dissenting votes in the tariff ruling, wrote that the Supreme Court’s decision “is not likely to greatly restrict Presidential tariff authority going forward.” He’s probably right.
The Trump administration has promised to implement any tariffs struck down by the Supreme Court with new tariffs based on legislation other than the IEEPA. And the White House has several legislative alternatives.
For example, Section 232 of the Trade Expansion Act of 1962 provides the president with authority to impose tariffs when U.S. national security is threatened. Section 301 of the Trade Act of 1974 authorizes the president to levy tariffs in response to unfair trade practices of other countries. Section 122 of this act also allows the president to impose tariffs of up to 15% to address trade deficits, although they can remain in effect for only 150 days.
I suspect the White House will play a game of tariff whack-a-mole. If a tariff is successfully challenged in court, the administration will likely try to implement a similar tariff under a different legislative authorization. However, it will be difficult for President Trump to impose tariffs simply because he doesn’t like what another country does, as he threatened to do when Brazilian authorities prosecuted his ally, former President Jair Bolsonaro.
What could cause my prediction to fall flat
Could my prediction that the stock market surge due to the Supreme Court’s ruling will be fleeting fall flat? Maybe, but I doubt it.
A recent Pew Research survey found that Americans oppose Trump’s tariffs by a 2-to-1 margin. Another survey conducted by Ipsos found that 74% of respondents believe tariffs will raise the prices of the products they buy, with 67% stating they have already seen price increases due to tariffs. President Trump could ultimately decide that tariffs aren’t a winning issue politically.
The president also likes to see the stock market go up under his watch. His appointed Attorney General, Pam Bondi, even tried to change the conversation during her testimony before the U.S. House of Representatives Judiciary Committee from the Epstein files to the stock market, stating, “The Dow is over 50,000 right now. The S&P at almost 7,000, and the Nasdaq smashing records. Americans’ 401ks and retirement savings are booming. That’s what we should be talking about.”
Perhaps President Trump will conclude that tariffs could get in the way of both GOP control of Congress and the stock market’s resurgence. However, given that Trump quickly denounced the Supreme Court ruling and vowed to implement new tariffs, I don’t see that happening. The stock market could regain its momentum, but it probably won’t be due to the “sugar high” following the recent Supreme Court decision.
