On February 20, 2026, the Supreme Court struck down the core of the Trump administration’s tariff program.
Last April, the President had imposed the tariffs unilaterally under the International Emergency Economic Powers Act (IEEPA), the first time the law had been used to levy tariffs. Throughout the remainder of 2025, the IEEPA tariffs generated about $130B in revenue but also triggered lawsuits and political controversy.1 The Supreme Court ruled 6-3 on Friday that the President lacked the authority to impose such sweeping tariffs under IEEPA, setting the stage for major shifts in trade policy and potentially enormous refund obligations, though the ruling did not expressly address the latter possibility.
Within hours of the ruling, President Trump announced a new 10% global tariff (which he later raised to 15%, the maximum allowed) under Section 122 of the Trade Act of 1974, which allows temporary tariffs for 150 days. During that time, the administration plans to look for legal ways to levy tariffs long term.
Markets responded positively after the news, but it’s still unclear what the future holds. Such uncertainty could make it difficult for businesses to plan, causing them to postpone investment and hiring decisions. Market volatility is a possibility as further developments unfold. But remember—volatility is a feature of the stock market, not a bug.
It has been almost a year since the Trump administration first announced global tariffs on nearly every U.S. trading partner. Following that news, the stock market experienced a sharp, negative reaction. The S&P 500 charted a steep decline beginning April 3, 2025 and hit its lowest point on April 8, 2025, before rebounding sharply on April 9, 2025. Reacting to short-term moves tends to be an unwise strategy for long-term investors as illustrated in the following chart, which graphs the year-to-date (YTD) return of the index (in blue) vs. the same time period minus April 9th (in brown):
Historically, the best days for the stock market have occurred close to the worst days, just like in April 2025. Investors who exit the market during periods of volatility tend to miss those rebounds and potentially irreparably harm their returns. The following chart is another way to view the impact of missing just a few of the best days:
It’s important to remember that while policy changes like this can create short-term volatility, corporate earnings, economic growth, and valuations tend to be the true drivers of long-term market performance. As we mentioned in our most recent investment commentary, Investment Commentary: Q4 2025 A Year In Review, staying patient and focused remains key to navigating uncertainty. We will continue to follow the outcome of the Supreme Court’s decision and any potential effects on markets and the economy, but we recommend investors remain focused on their personal financial goals and resist the urge to make portfolio changes based on headlines.
Sources:
https://www.wsj.com/us-news/law/trump-tariffs-supreme-court-decision-29c26fa2
https://www.wsj.com/politics/policy/trump-increases-global-tariff-to-15-fdc2f89b?mod=article_inline
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