President Trump announced yesterday he would impose a new tariff of 25% on any country trading with Iran. He also predicted disaster if the U.S. Supreme Court were to rule his tariff orders are illegal. The president estimated that “many Hundreds of Billions of Dollars” or even “Trillions” were at stake if the government was forced to refund anyone who paid them.
“It would be a complete mess, and almost impossible for our Country to pay,” he said on Truth Social. “If the Supreme Court rules against the United States of America on this National Security bonanza, WE’RE SCREWED!”
The court could issue a ruling as soon as Wednesday. It had been expected to rule last week. It is not clear why the court is delaying.
But Wall Street analysts are increasingly sanguine about the ruling. As time goes by, many say, the tariff issue becomes less and less dramatic. And in the bigger macro picture, they’re less significant than predicted.
The longer the delay in the ruling the more likely it is because the court is leaning toward Trump, according to JPMorgan.
“Legal experts continue to expect the Supreme Court to rule against the use of emergency powers [under the International Emergency Economic Powers Act] to authorize tariffs, but note that each week the Supreme Court delays its decision increases the likelihood of the Trump administration prevailing,” JPMorgan analysts Amy Ho and Joyce Chang told their clients. “Historically, SCOTUS reserves its most impactful decisions for the end of its term in June, which allows for extended deliberation.” Both Supreme Court cases on the Affordable Care Act were pushed to June, they wrote.
The pair also note that in the underlying case, only $135 billion in potential tariff refunds are at stake.
Although Trump has touted the tariffs as a method of paying off the $38 trillion national debt, the reality is that collections so far have been too small to have much of an affect, according to James Knightley, ING’s chief international economist in the U.S. “Since April, tariff revenues are up $206 billion in those eight months relative to [fiscal] 2024, but not all are the IEEPA tariffs—they are estimated to perhaps be $130 billion. Sounds a lot, but the US is a $30 trillion-plus economy,” he told Fortune in an email.
“Many companies will be wary of drawing the ire of the president by claiming a refund and the hoops to jump through to reclaim through the courts could be quite onerous and deter others. Hence the actual amount that is reclaimed may be quite a lot less than $130 billion.”
Besides, he said, even if Trump loses the Supreme Court case he will likely reimpose the tariffs via some other regulation. “Given tariffs are a signature policy and the Republican polling isn’t looking very strong right now ahead of the midterms, the Administration will move swiftly to reinstate tariffs through other legally recognized routes. The promise of a $2,000 tariff dividend needs to be paid for somehow. This is merely shuffling money around seeing as Americans paid the tariffs in the first place only to get money returned, so it is difficult to argue this will be a major stimulus for the economy,” he said.
Tariff revenue is being generated at a current rate of $30.4 billion per month, for an annualized rate of $364.5 billion, according to data from Bloomberg provided to Fortune via Pantheon Macroeconomics. However, those revenues are already in decline as companies find workarounds and as Trump himself cuts deals, compromises, or delays the imposition of harsher measures.
Convera analyst Antonio Ruggiero is also unruffled by the upcoming ruling. If the tariffs are ruled illegal, “we expect the immediate [foreign currency exchange] reaction to be limited, as the broader consensus is that alternative mechanisms will be found to keep tariff revenues intact.”
“That said, in the medium term, we cannot exclude the possibility of mild bearish pressure on the dollar tied to expectations of further uncertainty and erratic trade manoeuvres should the administration be forced to remove such tariffs, particularly at a time when USD sentiment is increasingly fragile amid concerns over Federal Reserve independence,” he advised clients in an email seen by Fortune.
Here’s a snapshot of the markets ahead of the opening bell in New York this morning:
- S&P 500 futures were down 0.15% this morning. The last session closed up 0.16%.
- STOXX Europe 600 was flat in early trading.
- The U.K.’s FTSE 100 was up o.o5% in early trading.
- Japan’s Nikkei 225 was up 3.1%.
- China’s CSI 300 was down o.6%.
- The South Korea KOSPI was up 1.47%.
- India’s NIFTY 50 was down 0.25%.
- Bitcoin was at $92K.
