What do markets expect from US Supreme Court's ruling on Trump's tariffs

Core Viewpoint - The US Supreme Court is poised to deliver a significant ruling on President Trump's global tariffs, which could have far-reaching implications for trade policy and the economy [1][2]. Legal Authority and Refunds - The case examines whether the Trump administration lawfully imposed tariffs under the International Emergency Economic Powers Act (IEEPA) and whether importers are entitled to refunds if the tariffs are deemed unlawful [3][4][5]. - Legal experts suggest that if the court finds the use of IEEPA improper, it could lead to refunds estimated at up to $150 billion, creating a complex situation for the federal government [6]. Market Reactions and Predictions - Investors are anxious due to the uncertainty surrounding the ruling, with prediction markets indicating only a 28% chance that the Supreme Court will fully uphold the tariffs [7]. - Analysts from Morgan Stanley highlight that the court's decision could vary, potentially narrowing the president's authority or allowing some tariffs to remain while striking down others [9]. Economic Implications - A ruling against the tariffs could boost S&P 500 earnings before interest and taxes by approximately 2.4% in 2026, prompting a potential rally in equities, especially for companies reliant on imported goods [12]. - Consumer-facing businesses and retailers are expected to benefit the most from a favorable ruling, while sectors like materials and domestic producers may lag [13]. Bond Market Impact - A decision against the tariffs could negatively affect US government revenues, leading to higher Treasury yields and increased volatility in bond markets [15][16]. Broader Economic Context - Despite initial fears, the economic impact of the tariffs has been limited, with inflation effects being muted and the US trade deficit narrowing significantly [17]. - The administration argues that tariffs are reshaping trade flows without hindering economic growth, with Morgan Stanley projecting only modest economic effects if tariff rates remain unchanged [18]. Long-term Trade Policy Implications - The ruling is expected to set a precedent for how future presidents utilize emergency powers in trade matters, with significant stakes for companies across various sectors [19][20].