Market uncertainty grows as Supreme Court weighs Trump’s emergency tariff powers

A ruling that could shake markets

Financial markets are bracing for potential turbulence as the US Supreme Court prepares to rule on President Donald Trump’s use of emergency powers to impose tariffs. The decision, expected as early as Friday, carries implications far beyond a single legal dispute. Analysts warn that striking down the tariffs could trigger sharp market reactions, particularly in sectors exposed to trade policy shifts, while upholding them would reinforce a far reaching interpretation of executive authority.

The legal question before the court

At the centre of the case is whether Trump can rely on the International Emergency Economic Powers Act to impose tariffs without explicit congressional approval. The law was originally designed to give presidents flexibility during genuine national emergencies, particularly involving foreign threats. Critics argue that using it to reshape trade policy stretches its intent, effectively allowing the White House to bypass Congress on a core economic function. Supporters counter that modern economic risks justify a broader reading of emergency authority.

Why this case matters now

This ruling is widely seen as the Supreme Court’s first major judgment on the legality of a flagship Trump policy since his return to the White House. That timing amplifies its significance. Markets are not just reacting to the tariff question itself but also to what the decision signals about the balance of power in Washington. A ruling against Trump could constrain future presidents, while a ruling in his favour could cement a precedent for aggressive executive action on trade.

Signals from the justices

During arguments in November, several justices appeared sceptical about the administration’s position. Questions from the bench suggested discomfort with the idea that emergency powers could be used indefinitely or for broad economic restructuring. That scepticism has filtered into market expectations. Online betting markets currently place the probability of the tariffs being upheld at around 30 percent, reflecting growing belief that the court may rein in the administration’s approach.

Potential market reactions

If the court strikes down the tariffs, markets could see an immediate response. Companies that have benefited from protectionist measures might face pressure, while firms reliant on global supply chains could rally on expectations of lower trade barriers. Currency markets may also react, particularly if investors reassess the direction of US trade policy. Conversely, if the tariffs are upheld, investors may price in prolonged uncertainty and a more fragmented global trade environment.

Broader implications for executive power

Beyond tariffs, the case represents the most serious legal test yet of Trump’s expansion of executive power. A decision limiting the use of emergency authorities would reinforce congressional oversight and potentially embolden lawmakers to challenge future unilateral actions. A decision in Trump’s favour would strengthen the presidency at the expense of legislative checks, reshaping how economic policy is made in the United States.

Global trade partners watching closely

The outcome will be closely watched by US trading partners, many of whom have adjusted policy and investment decisions around the assumption that Trump’s tariffs could remain in place. A ruling against the administration could reopen negotiations and reduce friction, while a ruling in favour could harden existing trade disputes. Either way, the decision will influence expectations around US reliability and predictability in trade relations.

A defining moment for markets and policy

For investors, the case underscores how legal decisions can become market moving events. The Supreme Court is not typically associated with day to day market volatility, but when rulings intersect with trade, executive power, and global economics, the impact can be immediate. Friday’s decision is shaping up to be one such moment.

As markets wait, uncertainty remains the dominant theme. Whether the court curbs or confirms Trump’s tariff authority, the ruling will help define the contours of US economic governance for years to come.