A watershed day for U.S. trade policy is approaching as the Supreme Court prepares to rule on the legality of the administration’s aggressive use of tariffs.
As soon as Wednesday morning, the court will decide on whether higher tariffs imposed last year under the International Emergency Economic Powers Act, without approval from Congress, are allowed under the Constitution.
If the administration loses its case, the federal government could have to refund anywhere from $80 billion in tariffs that have been collected to our estimate of $130 billion.
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The Treasury Department has collected $236.15 billion in tariff revenues for 2025, with most of it following the imposition of significantly higher levies in April.
The average tariff as of Nov. 14 was 14.03%, with trade taxes on major trading partners like Canada at 5.96%, Mexico at 8.43% and China at 30.75%.
The administration is counting on these revenues. If the tariffs are upheld, the annual collections in the future will be near $367 billion by our estimate.
But a ruling against the administration would, at least in the short term, roil fixed income markets and cause interest rates to increase as the nation’s fiscal path is disrupted. In addition, businesses would need to decide how to handle their cash windfall: Do they use the cash to cut prices, or reinvest in their business, or buy back their stock?
At the least, businesses have endured thinner profit margins as the tariffs have escalated, which may lead some to compensate themselves.
However it plays out, the money at stake is significant.
There was roughly an additional $155 billion in revenues obtained through the increase in trade taxes last year. Of that total, 84%, or about $130 billion, were custom duties, which may need to be refunded.
Not the end of the story
It’s unlikely, though, that the administration would simply fold its tent on its desire to use tariffs as cudgel in trade policy, and boost the government’s coffers.
We took Treasury Secretary Scott Bessent at his word when he recently said that he “was confident in the ability to reconstitute any lost tariff revenue by imposing duties under other legal authorities.”
Under this scenario, the administration could still seek to impose tariffs under Section 232 of the 1962 Trade Expansion Act, Sections 122 and 301 of the 1974 Trade Act or Section 338 of the 1930 Tariff Act.
If that happens, the probability of a sustained market reaction following any decision against the administration is low.
For this reason, the notion of long-term relief delivered to importers remains questionable at best.
Any decision that does not explicitly lay out a refund schedule most likely sets the stage for further legal action without causing any sustained dislocation across fixed income markets or interest rates.
