A high-stakes battle over the fate of hundreds of billions of dollars in tariffs is playing out at the U.S. Supreme Court.
On Wednesday, the court heard oral arguments on whether the President has the authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA). Based on the signals from the bench, the tide appears to be turning.
However, even if the Supreme Court ultimately rules that some of the current tariffs are invalid, does this signal a turning point for global trade? And will the vast sums of tariffs already paid—potentially exceeding a hundred billion dollars—be refunded?
For businesses and investors reliant on global supply chains, Ultima Markets believes the situation is far from simple.
A Shift in the Wind: The Justices’ “Skepticism” and the Market’s Pivot
During today’s oral arguments, a majority of the justices expressed skepticism about the President’s power to levy tariffs by invoking the IEEPA.
In the debate, the three liberal justices (Jackson, Kagan, Sotomayor) clearly opposed the government’s position. From the conservative wing, Justice Gorsuch also voiced concerns about the delegation of congressional power, worrying it could become a “one-way ratchet” toward executive overreach.
Among the remaining conservative justices, Alito and Thomas appeared to support the administration’s claims, with Kavanaugh also showing some sympathy. The real suspense lies with two key figures: Justice Barrett and Chief Justice Roberts.
- Justice Barrett doubted whether Congress intended to grant such sweeping tariff authority when it passed IEEPA. However, she repeatedly questioned whether imposing tariffs, a “lesser” trade restriction, should be permissible since IEEPA explicitly allows the president to block imports entirely.
- Chief Justice Roberts, though he spoke little, noted that tariffs are fundamentally taxes, a core power of Congress, not the President. “The vehicle is the imposition of taxes on Americans, and that has always been a core power of Congress,” Roberts remarked.
Overall, the situation is delicate: four justices lean toward opposition, three lean toward support, and two are undecided but critical swing votes who also appear skeptical.
Capital markets are the most perceptive. Data from the prediction market Polymarket shows that before the oral arguments, the market priced the probability of the court upholding the tariffs at around 40%. During the hearing, this probability plunged to as low as 20% before stabilizing around 25% after the arguments concluded. This 15-percentage-point drop is enough to show that market expectations have shifted significantly.
Looking Ahead: An “All-or-Nothing” Ruling and the Billion-Dollar Refund Puzzle
A decision in this closely watched case is expected in December 2025 or January 2026.
Given the case’s importance and the potential for a divided opinion, the court will need to be deliberate. However, because the case is on a fast track and to prevent the potential refund amount from escalating, the court will likely expedite its ruling.
One trend to watch is that the final decision will likely be “all-or-nothing.” Before the arguments, there was speculation that the court might treat tariffs imposed under different declared emergencies separately. Yet, the debate barely touched on the specifics of these emergencies, suggesting the court is likely to rule on all IEEPA-based tariffs as a single bloc.
If the court does invalidate the tariffs, the next question is even more challenging: refunds.
As of this September, the U.S. government had collected approximately $89 billion in tariffs through IEEPA. By the time the court rules, this figure is expected to climb to between $115 billion and $145 billion.
The ruling will likely send the case back to lower courts to determine the remedy, and importers will need to take further legal action to seek refunds. This process is expected to last for months, if not longer.
More Than One Option in the Administration’s Toolkit
So, if the Supreme Court does strike down IEEPA-based tariffs, will these trade barriers simply crumble?
The answer is: highly unlikely.
This is the core of the issue. Even if the IEEPA path is blocked, the U.S. administration has several other legal authorities in its “toolbox” to implement essentially the same tariff policies.
Currently, IEEPA-based tariffs account for an increase of about 7.6 percentage points in the overall U.S. effective tariff rate. If this is nullified, the government could quickly deploy the following alternatives:
- Section 122 of the Trade Act of 1974: Authorizes the president to impose tariffs of up to 15% for 150 days to address a balance of payments deficit. This action does not require a lengthy investigation and could theoretically replace most existing tariffs within days.
- Section 301 of the Trade Act of 1974: Authorizes the U.S. Trade Representative to launch investigations into “unfair trade practices” and impose tariffs with no limits on rates or duration. The administration could quickly initiate Section 301 investigations against major trading partners, paving the way for new tariffs within months.
- Section 232 of the Trade Expansion Act of 1962: Previously used to tax steel, aluminum, and auto imports, its scope could be expanded to more goods on national security grounds.
- Section 338 of the Tariff Act of 1930: Authorizes the president to impose tariffs of up to 50% on countries that discriminate against the U.S., without requiring a formal investigation.
The Big Picture Remains Unchanged
Taking all this into account, Ultima Markets believes the Supreme Court’s ruling is more about procedure than finality.
Even if the court blocks the imposition of tariffs via IEEPA, the U.S. government will very likely use the other legal tools mentioned above to quickly reimpose fundamentally similar tariffs on its major trading partners.
The final outcome could be:
- Little impact on major trading partners: Existing tariffs will likely be seamlessly replaced by new ones authorized under different laws.
- Potential benefits for a few smaller trading partners: If the new tariffs have a lower cap (like the 15% under Section 122), these countries might see a slight reduction in their effective tariff rates, but the effect on the overall U.S. effective tariff rate is expected to be only about one percentage point.
- New uncertainty for trade agreements: Existing trade deals could be affected, forcing the administration to use other authorities to reaffirm tariff provisions and introducing a new round of uncertainty.
For global markets and investors, it is crucial to understand that this Supreme Court battle will not be the end of the tariff story. When the final ruling comes down, it won’t mean the dust has settled.
Disclaimer
The comments, news, research, analysis, prices, and other information contained herein are provided as general market information for the purpose of assisting readers in understanding market conditions and do not constitute investment advice. Ultima Markets has taken reasonable measures to ensure the accuracy of the information but does not guarantee its accuracy and may change it at any time without notice. Ultima Markets will not be liable for any loss or damage, including but not limited to any loss of profit, which may arise directly or indirectly from the use of or reliance on such information.
