Supreme Court Tariff Ruling Creates New Economic Uncertainty for Businesses

A Supreme Court decision striking down key portions of President Trump's tariff policies has reignited economic uncertainty for businesses and investors. The ruling has prompted new temporary tariffs while the administration searches for alternative approaches, creating planning challenges for companies.

WASHINGTON – Business leaders, government officials, and economic analysts who thought the chaotic trade policy shifts of last year had stabilized now find themselves facing renewed uncertainty following a Supreme Court decision that dismantled major components of President Donald Trump’s tariff strategy.

The Friday ruling, decided by a 6-3 margin, has recreated the unpredictable environment that characterized early 2025, when tariff policies seemed to change without warning. Companies must now grapple with questions about which products will face taxes, what rates will apply, and which countries will be affected as the administration scrambles for solutions.

Many businesses that had developed strategies to manage higher import taxes now face difficult decisions about adjusting prices, accelerating inventory purchases while tariffs remain uncertain, and potentially postponing hiring or capital investments until clarity returns.

European Central Bank President Christine Lagarde expressed concern about the disruption during her Sunday appearance on CBS’s “Face the Nation.” “If it shakes the whole equilibrium which people in trade have got used to…it is going to bring about disruptions,” Lagarde stated. “You want to know the rules of the road before you get in the car. It’s the same with trade. It’s the same with investment.”

Lagarde emphasized that businesses “want to do business. They don’t want to go into lawsuits,” while expressing hope that future U.S. tariff policies would be “sufficiently thought through so that we don’t have, again, more challenges, and the proposals will be in compliance with the Constitution.”

The Supreme Court determined that the emergency legislation Trump used as justification did not provide authority for imposing the tariffs. In response, Trump announced a global levy using different legal authority – initially set at 10%, then raised to 15% – that would remain in effect for five months while his administration develops more permanent solutions.

EY-Parthenon Chief Economist Gregory Daco noted that while companies had begun adapting to previous tariff structures, underlying trade policy uncertainty persisted and continues affecting business planning. “We’ve seen extreme volatility by country and by product. That’s very uncertain still,” Daco explained. “It’s impossible to plan. You hear that tariffs are off and you are considering how to get refunds. Then a few hours later it’s 10%. Then it’s 15% the next day….Not having that stable framework is hurtful for activity, hiring, investment.”

Federal Reserve policymakers had recently grown confident that tariff-related inflation pressures were beginning to subside, reflecting widespread belief that 2025’s confusion was ending. While that assessment may prove accurate, the situation has become more volatile as the administration explores different tariff approaches that could take months to implement and likely face legal challenges at each stage.

Import tax rates might decrease temporarily but could rise again on an unpredictable timeline as Trump attempts to recreate the court-rejected tariffs through alternative legal mechanisms that may require separate investigations or Congressional approval.

Justice Neil Gorsuch highlighted the importance of procedural protections in creating stable policy in his opinion supporting the majority decision. He noted that proposals surviving the legislative process “must earn such broad support…they tend to endure, allowing ordinary people to plan their lives in ways they cannot when the rules shift from day to day.”

Federal Reserve officials frequently emphasized certainty’s value throughout last year, stating that rapid changes in trade, immigration, and other policies complicated economic analysis and appeared to discourage business hiring and investment decisions.

The Supreme Court ruling’s economic impact comes during a period of generally positive sentiment. A recent National Association for Business Economics survey found nearly 60% of responding economists don’t anticipate a recession for at least twelve months, increasing from 44% in August. Additionally, 74% believe artificial intelligence technology will at least “moderately increase productivity growth over the next three to five years,” potentially representing significant improvement in U.S. economic capacity.

While this new uncertainty wave may not derail that optimism, Oxford Economics Lead U.S. Economist Bernard Yaros suggested it could still negatively impact U.S. growth in coming months. Following Friday’s Supreme Court decision, Yaros calculated that effective tariff rates would drop from 12.7% to 8.3% after excluding the voided levies.

However, this calculation doesn’t account for Trump’s new 15% across-the-board levy, which may or may not affect countries with separate bilateral agreements and would only last five months. Meanwhile, the administration seeks more permanent solutions requiring separate investigations and potentially Congressional action.

“Any economic boost from lowering tariffs in the near term will likely be partly offset by prolonged uncertainty,” Yaros stated. “Even if the administration replicates the overall level of tariffs using other means, the by-sector and by-country implications could end up looking quite different, which will create another bout of trade policy uncertainty for businesses, investors, and households.”