Supreme Court tariff ruling could swing S&P 500 by up to 2%
JPMorgan models four scenarios as $124B in customs duties hang in balance, with 78% of investors expecting tariffs blocked
The U.S. Supreme Court is poised to deliver a landmark ruling today on the legality of tariffs imposed under the International Emergency Economic Powers Act, a decision that could swing the S&P 500 by as much as 2% depending on the outcome.
The case, Learning Resources, Inc. v. Trump, consolidated with Trump v. V.O.S. Selections, centers on whether IEEPA authorizes the president to implement broad tariffs based on national security concerns. The stakes are substantial: approximately $124 billion in customs duties collected through January of the 2026 fiscal year hang in the balance.
JPMorgan's trading desk has outlined four scenarios for how markets might react to the ruling, assigning probabilities and projected S&P 500 movements for each. The most likely outcome, according to the bank's analysts, is that the Court strikes down the tariffs but the administration immediately replaces them using alternative authorities such as Section 232, Section 301, or Section 122 of the Trade Act of 1974. JPMorgan assigns this scenario a 64% probability and projects an initial 'risk-on' spike of 0.75% to 1.0%, followed by a more modest net gain of 0.1% to 0.2%.
'Even if the IEEPA tariffs are struck down, the administration is widely expected to pivot quickly to other trade authorities,' analysts note. 'This suggests that tariffs are unlikely to disappear entirely, though the legal basis and scope may change.'
If the Court upholds the tariffs—a scenario JPMorgan assigns a 26% probability—the S&P 500 is expected to decline by 0.3% to 0.5%, potentially accompanied by larger movements in yield curves. The more bullish scenarios, which the bank considers less probable, involve the tariffs being struck down either after the midterms (9% chance) or with no replacement at all (1% chance). In those outcomes, the S&P 500 could rise by 1.25% to 2.0%, with small-cap stocks represented by the Russell 2000 expected to outperform.
Market participants appear to be positioning for a ruling against the tariffs. A Goldman Sachs survey of over 200 investors found that 78% expect the Supreme Court to block at least some of the Trump administration's tariffs. However, only 30% of respondents anticipate that the ruling will lead to refunds for duties previously paid.
Lower courts have already ruled against the IEEPA-based tariffs, with both the U.S. Court of International Trade and the Federal Circuit determining that IEEPA does not grant the president unlimited power to impose tariffs. If the Supreme Court follows those precedents, the average statutory tariff rate would drop from 16.1% to 10.4%, though new tariffs implemented under alternative authorities are expected to maintain an overall higher effective tariff rate.
The ruling comes at a sensitive moment for markets, with investors already grappling with uncertainty around fiscal policy, interest rates, and geopolitical tensions. Even as most market participants expect a favorable outcome, analysts caution that 'this ongoing uncertainty is likely to inject volatility into the U.S. economy and investment markets' regardless of which way the Court decides.