In an unsurprising ruling, the Supreme Court denied the Executive Branch the ability to implement tariffs under the International Emergency Economic Powers Act (IEEPA). The law states that the President may exercise the authority granted in the law to “deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy or economy of the United States, if the president declares a national emergency with respect to such threat.”

The case centered on the specific authority the law grants to the president, with the defense arguing that tariffs are one of those authorities, given the law allows the president to “investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit …  importation or exportation.” Writing in the majority, Chief Justice Roberts writes: “Absent from this lengthy list of specific powers is any mention of tariffs or duties. Had Congress intended to convey the distinct and extraordinary power to impose tariffs, it would have done so expressly, as it consistently has in other tariff statutes. The power to ‘regulate … importation’ does not fill that void. Indeed, when Congress addresses both the power to regulate and the power to tax, it does so separately and expressly. That it did not do so here is strong evidence that ‘regulate’ in IEEPA does not include taxation. A contrary reading would render IEEPA partly unconstitutional. IEEPA authorizes the president to ‘regulate … importation or exportation’. But taxing exports is expressly forbidden by the Constitution.” Effectively, Roberts is arguing that if Congress intended to delegate its “core congressional power of the purse,” it would have done so explicitly.

While the ruling bars the president from implementing tariffs under IEEPA, there are other statutes under which the president may impose tariffs. Indeed, President Trump announced shortly after the ruling that he would be immediately imposing a blanket 10% tariff on all imports under Section 122 of the Trade Act of 1974. Section 122 allows for the imposition of tariffs, up to 15%, for a period of 150 days. Likewise, Section 232 of the Trade Expansion Act of 1962, which the President has used to implement tariffs on Steel & Aluminum, Auto and Auto Parts, Wood Products, and Copper, grants product-level tariff authority on national security grounds. Similarly, Section 301 of the Trade Act of 1974 tariffs, which were imposed on China by President Trump in his first administration and remain in place today, grants country-level tariff authority for unfair trade practices. The administration believes that the IEEPA tariffs can be replaced under other tariff authorities, but only Section 122 allows for the imposition of tariffs without a detailed report outlining the justification, which will take a significant amount of time.

Therefore, we believe that tariffs, which President Trump views as the signature economic policy achievement of his second term, are not going away anytime soon. Moreover, the effective tariff rate on imports is unlikely to be changed. The ultimate tariff rate for any given country or product, however, remains uncertain. In the meantime, negotiated trade deals will almost certainly be honored by our trading partners, which is supportive of the administration’s goal of rebuilding the U.S. industrial base.

The Supreme Court did not address what is to become of the revenue already collected on the IEEPA tariffs. It is likely that every importer will need to sue in order to be reimbursed for tariffs already paid, which could be more than $175 billion in disbursements. What is not clear is whether the aforementioned tariff authorities may be imposed retroactively, absolving the U.S. government from needing to rebate tariff payments at all. Regardless, $175B in the context of a $1.8T deficit is relatively immaterial. The rebates — if they happen — could be seen as an additional fiscal stimulus, or perhaps a one-time corporate tax cut. But they are unlikely to have a meaningful impact on GDP growth.

Uncertainty will remain a headwind, but to a lesser degree. With the Trump administration relieved of the ability to implement tariffs on a whim, businesses can be more confident in their investment and hiring decisions. Tariffs will now be implemented in a much more deliberate, process-oriented manner, and with plenty of warning.

Thus, we believe the story for the United States economy in 2026 remains unchanged. We believe the industrial economy will continue to rebound, driven by more accommodative Federal Reserve policy, favorable tax policy and the resurrection of economic statecraft from this administration. Activity will continue to broaden beyond data center construction and software investment. The labor market will stabilize as consumer and business confidence improves with the receding tariff policy uncertainty, albeit with pockets of weakness (new college graduates, professional services, software). Productivity will continue to improve, putting upward pressure on supply, reducing inflation to the Federal Reserve’s target. The headwinds have moderated; the tailwinds to the industrial growth cycle are building.