In short
The U.S. Supreme Court heard arguments on whether most Trump-era tariffs are lawful, focusing on the International Emergency Economic Powers Act (IEPA). A ruling against the administration could undo much of the 4–5x tariff increase seen in 2024, potentially acting as a market catalyst.
Key claims
Court outcomes are uncertain despite a Republican-leaning bench; judges may disagree on whether tariffs fit IEPA’s “economic crisis/foreign adversary” purpose. Even if IEPA is struck, tariffs may persist via other executive authorities, especially Section 301 (unfair trade practices) and possibly Section 232 (product-specific tariffs).
Notable examples
Section 301 would require a study; Section 232 could lower effective tariff rates but may cause interim volatility, “similar to what happened in April.”
Guests
No guest names are mentioned; only host Michael Zezas (Global Head of Fixed Income Research and Public Policy Strategy).
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOImpact of Supreme Court on Tariffs
0:18 to 2:56
Discussion on the implications of the Supreme Court's ruling on tariffs and market reactions.
“Supreme Court heard arguments about the legality of most of the tariffs implemented by the Trump administration.”
Transcript
Automatic transcript. May contain errors.0:00Michael Zezas:Welcome to Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income Research and Public Policy Strategy. Today, we discuss the challenge against tariffs at the Supreme Court and how it might affect markets. It's Thursday, November 6th at 11 a.m. in New York. This week, the U.S. Supreme Court heard arguments about the legality of most of the tariffs implemented by the Trump administration. administration. Investors are paying close attention because, if the Supreme Court rules against the administration, it could undo much of the four to five times tariff increase that's taken place in the U.S.
0:35Michael Zezas:this year. That would seem to set up this hearing, and a subsequent ruling which could come as early as this month, as a clear market catalyst. But, like many policy issues affecting the economic and markets outlook, the reality is more complicated. Here's what you need to know. First, there's ample debate among experts about how the court will rule. That may seem surprising given the court's makeup. Three of the nine judges were appointed by President Trump and six of the nine by Republican presidents. But it's not clear they'll agree that the president used his executive power in a way consistent with the law that granted the executive branch this particular power.
1:14Michael Zezas:That law is the International Emergency Economic Powers Act, or IEPA. And without getting into too much detail, the law appears to have been designed to deal with economic crises and foreign adversaries, which the court might argue is not evident when considering tariffs levied against traditional allies. But the next important point is that a ruling against the Trump administration might not actually change much around U.S. tariff levels. How is that possible? It's because the administration has other executive tariff powers it can deploy if needed, and ones that are arguably more durable. For example, Section 301 gives the president wide latitude to designated trading partners undertaking unfair trade practices.
1:56Michael Zezas:So this authority could be swapped in for IEPA. That could take time, as Section 301 requires a study to be submitted, but there are other temporary authorities that could bridge the gap. So the U.S. can likely ensure continuity of current tariff levels if it wants, keeping tariffs more of a constant than a variable in our outlook. Of course, we have to consider ways we could be wrong. For example, the administration could use a ruling against it to refocus instead on product-specific tariffs through Section 232. That likely would result in U.S. effective tariff rates drifting a bit lower, alleviating some of the pressure our economists see on consumer and corporate importers, adding more support to risk assets.
2:38Michael Zezas:But that scenario might come with some volatility along the way if the administration feels the need to float larger product-specific tariff levels before settling on more palatable levels, similar to what happened in April. So, bottom line, there's more tariff policy noise to navigate this year. It could bring some market volatility and maybe even a bit of upside, but the most likely outcome is that we circle back to the approximate levels we're at today. Setting up for 2026, that means other debates, like how companies respond to tariffs and capital spending incentives, are probably more important to the outlook than the level of tariffs themselves.
3:17Michael Zezas:We're digging in on all that and we'll keep you in the loop. Thanks for listening. If you enjoy Thoughts on the Market, please leave us a review and tell your friends about the podcast. We want everyone to listen. the preceding content is informational only and based on information available when created it is not an offer or solicitation nor is it tax or legal advice it does not consider your financial circumstances and objectives and may not be suitable for you
From the publisher
Earlier this week, the U.S. Supreme Court heard a case challenging the current administration’s tariff policy. Our Head of Fixed Income Research and Public Policy Research explains the potential magnitude of the case’s outcome for markets.
Read more insights from Morgan Stanley.
----- Transcript -----
Michael Zezas: Welcome to Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income Research and Public Policy Strategy.
Today, we discuss the challenge against tariffs at the Supreme Court and how it might affect markets.
It’s Thursday, Nov 6th at 11am in New York.
This week, the U.S. Supreme Court heard arguments about the legality of most of the tariffs implemented by the Trump administration. Investors are paying close attention because if the Supreme rules against the administration, it could undo much of the four-five times tariff increase that’s taken place in the U.S. this year. That would seem to set up this hearing, and a subsequent ruling which could come as early as this month, as a clear market catalyst. But, like many policy issues affecting the economic and markets outlook, the reality is more complicated.
Here’s what you need to know.
First, there’s ample debate among experts about how the court will rule. That may seem surprising given the court’s makeup. Three of the nine judges were appointed by President Trump, and six of the nine by Republican Presidents. But it's not clear they’ll agree that the President used his executive power in a way consistent with the law that granted the executive branch this particular power. That law is the International Emergency Economic Powers Act, or IEEPA. And, without getting into too much detail, the law appears to have been designed to deal with economic crises and foreign adversaries, which the court might argue is not evident when considering tariffs levied against traditional allies.
But, the next important point is that a ruling against the Trump administration might not actually change much around U.S. tariff levels. How is that possible? It's because the administration has other executive tariff powers it can deploy if needed, and ones that are arguably more durable. For example, Section 301 gives a President wide latitude to designate a trading partner as undertaking unfair trade practices. So this authority could be swapped in for IEEPA. That could take time, as Section 301 requires a study to be submitted, but there are other temporary authorities that could bridge the gap. So the U.S. can likely ensure continuity of current tariff levels if it wants – keeping tariffs more of a constant than a variable in our outlook.
Of course, we have to consider ways we could be wrong. For example, the administration could use a ruling against it to re-focus instead on product specific tariffs through Section 232. That likely would result in U.S. effective tariff rates drifting a bit lower, alleviating some of the pressure our economists see on the consumer and corporate importers, adding more support to risk assets. But that scenario might come with some volatility along the way if the administration feels the need to float larger product specific tariff levels before settling on more palatable levels – similar to what happened in April.
So bottom line, there’s more tariff policy noise to navigate this year. It could bring some market volatility, and maybe even a bit of upside, but the most likely outcome is that we circle back to the approximate levels we are today. Setting up for 2026, that means other debates – like how companies respond to tariffs and capital spending incentives – are probably more important to the outlook than the level of tariffs themselves. We’re digging in on all that and will keep you in the loop.
Thanks for listening. If you enjoy Thoughts on the Market, please leave us a review and tell your friends about the podcast. We want everyone to listen.