Economic Commentary

Executive Summary

The key takeaways following the U.S. Supreme Court tariff ruling:  

• Tariffs aren’t going away – Overall tariff rates are roughly unchanged, thus minimal macro-level economic impact.
• These are interim steps – More tariff changes coming, which prolongs uncertainties and currency volatility.
• Nuanced outcomes – While winners and losers will emerge, those will be narrow and highly specific by country and product.
• Don’t expect tariff refunds any time soon, if ever

What Happened

Roughly 60% of tariffs enacted during 2025 were under the International Emergency Economic Powers Act (IEEPA), which were announced in multiple steps addressing border security (Canada and Mexico), drug trafficking (fentanyl from China), and so-called reciprocal tariffs. The U.S. government collected at least $160 billion in IEEPA-related tariff revenue, according to estimates by the Tax Foundation.

As widely expected, the Supreme Court ruled that IEEPA doesn’t authorize the president to impose tariffs; however, the ruling didn’t address refunds for the tariffs that were collected.

The White House immediately imposed a 15% global tariff under Section 122 of the Trade Act of 1974, which allows tariffs or quotas to address “large and serious U.S. balance-of-payment deficits” for a maximum of 150 days unless Congress authorizes an extension.

Our Take

There’s a lot to digest in the aftermath of the Supreme Court tariff ruling. In our view, there are four key takeaways.

Importantly, tariffs aren’t going away since the White House essentially replaced tariffs under IEEPA with the broader 15% global tariff utilizing Section 122 authorization. While there are distinct differences, particularly by country and product, the overall average effective tariff rate declined slightly to 13.7% from 16.0% with shifts in authorizations and composition, according to the Yae Budget Lab. And, as the chart on page 1 illustrates, the actual tariff rate paid was roughly 10% as of December 2025 (duties collected based on the value of goods imported).

However, the “new” tariffs imposed under Section 122 expire after 150 days unless Congress authorizes an extension. In other words, the new tariffs are temporary and will need to be replaced using other authorizations, likely under Section 232 or Section 301. For example, the current steel and aluminum tariffs utilize Section 232, which deals with national security issues. Section 301 tariffs, which concern unfair trade practices and apply to specific countries or products, are mostly in force against China.

Unfortunately, the temporary nature of the Section 122 tariffs prolongs the trade uncertainties for many companies. That will likely be manifested in continued volatility for the U.S. dollar.

Implications for the U.S. dollar

In our annual outlook, we noted that we expect a wider, choppier trading range in the near term for the U.S. dollar. We assumed that the dovish-leaning new Federal Reserve (Fed) members could weigh on negative dollar sentiment, adding to downside pressure.

Indeed, the recent drop in the dollar appears to be potentially problematic. There’s a laundry list of issues plaguing the greenback, from threats to the independence of the Fed and a relentless debasement narrative to the "Sell America" trade.

Moreover, ongoing trade deficits and a reluctance by foreigners to recycle their U.S. trade surpluses into U.S. dollar–denominated assets, add to the headwinds. Admittedly there has been some institutional diversification by global central banks and asset managers recently, though those are to be expected.

Yet, the longer-term trends that support the dollar remain—the U.S. enjoys stronger economic growth and higher yields relative to other developed markets.

Implications for the U.S. economy

In our view, this tariff shift will have minimal macro-level economic impact for the U.S. Unfortunately, any benefit from the slightly lower overall average effective tariff rate will be offset by the ongoing uncertainty for businesses and consumers.

That said, the tariff shift will create both winners and losers. Hereto, though, parsing who will benefit from those potentially disadvantaged will be very nuanced and remains somewhat unclear at present. What happens with the trade deals struck during 2025? For instance, the deal with the United Kingdom called for 10% tariffs on most goods – did it just climb to 15%? Furthermore, there were tariff exemptions and carveouts for many product categories. Ultimately, any clarification on tariffs, lifting the veil of uncertainty, should be seen as a long-term positive for the U.S. economy.

Lastly, the issue of tariff refunds is complicated and is headed back to courts for resolution. Alas, similar court cases have taken years. Thus, resolution won’t come quickly.

Bottom Line

The economic effects of the latest shift in tariffs are expected to be modest at the aggregate level, though outcomes will be uneven, with narrow, country‑ and product‑specific winners and losers. Ongoing uncertainty will offset any benefit from a slightly lower effective tariff rate. The U.S. dollar faces near‑term headwinds from trade and policy concerns, but longer‑term supports—stronger U.S. growth and higher yields—remain intact.