U.S. Court Ruling on Trump Tariffs Adds Fresh Market Uncertainty
U.S. investors returned from the Labor Day holiday to new trade policy uncertainty after a federal appeals court ruled that most of President Donald Trump’s sweeping tariffs were illegal.
Wall Street’s main indexes slipped about 1% on Tuesday, while long-dated U.S. Treasury yields jumped amid a global bond selloff driven by fiscal worries.
The court allowed tariffs to remain in place until October 14, giving the Trump administration time to appeal to the Supreme Court. The decision, however, did not impact tariffs on steel and aluminum.
Markets Brace for Tariff Battle
Market participants said they are in “wait-and-see” mode as the case heads toward the Supreme Court. Still, the uncertainty adds to broader market concerns, including questions over the Federal Reserve’s independence and growing risks of U.S. stagflation.
“Whether it’s the level, timing, or validity of the tariffs, we just have to let it play out,” said Jim Baird, Chief Investment Officer at Plante Moran Financial Advisors. “What it means in the near term remains to be seen. How trade partners react is a big unknown.”
Earlier this year, Trump’s tariff agenda triggered market volatility. But clearer tariff levels and expectations of interest rate cuts had helped stocks rebound near record highs. RBC strategist Lori Calvasina noted that corporate uncertainty around tariffs will stay elevated, though lower than levels seen in spring.
Trump’s Tariff Strategy Likely to Stay
Treasury Secretary Scott Bessent said the administration has a contingency plan if the Supreme Court overturns Trump’s use of emergency powers to impose tariffs. He highlighted Section 338 of the 1930 Smoot-Hawley Tariff Act, which allows the president to impose tariffs of up to 50% for five months on countries discriminating against U.S. commerce.
Analysts at Raymond James also pointed out that Trump has multiple tariff authorities available, meaning the process could change but the overall outcome is unlikely to shift.
However, some investors warned that if the ruling stands, the U.S. may be forced to refund tariffs collected under emergency powers. Glenmede strategists estimated that potential refunds could approach $200 billion, raising fresh fiscal concerns.
