By Benjamin Picton, senior market strategist at Rabobank

US stocks closed higher on Friday following news that the Supreme Court had ruled 6-3 to uphold a lower court decision that found Trump’s signature tariff policy to be illegal. The court found that Trump acted beyond his authority by imposing tariffs under the International Emergency Economic Powers Act with the majority holding that tariffs are a branch of taxation and that the Constitution grants powers over taxation to Congress, not to the President. Critically, the Court found that IEEPA makes no specific mention of delegating tariff powers to the Executive and that there exists no precedent of IEEPA being used to levy tariffs.

Precious metals are higher in early trade, the DXY is down, US equity futures are pointing lower and Brent crude is down by almost 1%. Aussie yields are now bull-flattening after initially moving higher, but Kiwi yields are holding at higher levels following idiosyncratic strong retail sales data. Aussie stocks have opened weaker, but the Hang Seng, TAIEX and KOSPI are catching a bid, highlighting the winners-and-losers effect of shifts in tariff policy that has just delivered a boost to countries who previously had a comparatively bad deal.

Unsurprisingly, the administration reacted with disappointment to the decision but then moved quickly to impose new baselines tariffs of 10% - later increased to the maximum rate of 15% - using powers granted by Section 122 of the Trade Act. As regular readers would know, we have been pointing out for some time that this and other avenues exist – on firmer legal ground – for the administration to continue to pursue its tariff strategy. Other potential avenues include:

Section 232 of the Trade Expansion Act, which allows the President to impose tariffs of indefinite duration and with no cap if imports threaten national security. This requires a Commerce Department investigation finding that such a threat exists and would typically be applied on a sectoral basis.

Section 201 of the Trade Act, which allows tariffs up to 50% above existing rates for a duration of 4 years if imports cause or threaten serious harm to a domestic industry. This would require an International Trade Commission investigation, public hearings and would also likely be imposed sectorally.

Section 301 of the Trade Act, which authorizes uncapped tariffs in response to unfair foreign trade practices. This requires a US Trade Representative investigation, public hearings and consultation with the affected foreign government.

ŸSection 338 of the Tariff Act allows tariffs of up to 50% on goods from countries imposing unreasonable restrictions on US commerce. The President can make this determination directly, but it has never been applied and could be subject to legal challenge.

Treasury Secretary Scott Bessent has already indicated that the administration is preparing investigations under Section 232 and Section 301 to expand tariff coverage.

That’s not to say that this isn’t a big spanner in the works. The ruling immediately raises the prospect that US importers may seek refunds on the $160-175bn (estimated) paid in tariffs collected under the illegal IEEPA authority. That’s bad news bears for the US fiscal position, which was already in dire straits, and should only add to the pressure on the US Dollar index where the “sell America” meme has once again been a theme this year. Bessent was adamant over the weekend that the combination of Section 122, 232 and 301 tariffs will result in virtually unchanged tariff revenue in 2026, but presumably the 2025 revenues are now a write off. Equity traders will now be pricing in the positive effects of prospective refunds against negative effects of potentially higher term premia.

Source: ZeroHedge News