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2025-09-16 18:08:03
[Preview of the Supreme Court Tariff Ruling: Wall Street Shakeup Could Lead to Hundreds of Billions in Tax Refunds] ⑴ The Supreme Court's upcoming ruling on the constitutionality of tariffs could cause chaos in the American business community and pose a severe test to fiscal stability. In the past, Trump's tariff rhetoric caused a sharp drop in asset prices in early April, but the market subsequently adjusted, and businesses found ways to absorb the costs, even reaching new highs. ⑵ If the court overturns the existing tariff system, it will create significant uncertainty. Some market participants believe that maintaining the tariffs would validate the status quo, while removing them could lead to market volatility. Goldman Sachs and Morgan Stanley, among others, estimate that if the tariffs are deemed unconstitutional and refunds are granted, this could release up to $100 billion in one-time funds to businesses. However, this benefit could be offset by the ensuing greater uncertainty, political and legal disputes, and potential escalation of trade frictions. ⑶ Heightened trade uncertainty could cause businesses to halt investment and freeze hiring, while households could also reduce spending, leading to a pullback in US stock indices from record highs and a further widening of credit spreads. The market has already largely priced in the impact of tariffs on inflation, growth, and asset prices. ⑷ The complexity of tax refunds lies in determining who will benefit. While large-scale tax rebates may be seen as an unexpected stimulus for businesses, their impact on the US fiscal situation warrants attention. If the tariffs are ruled unconstitutional, while potentially triggering a brief stock market rally, Trump could still reimpose them through other mechanisms, increasing the unpredictability of future policy. (5) The bond market may experience short-term relief, as a finding of unconstitutional tariffs could reduce inflationary pressure. However, in the long term, tax rebates will pose challenges for bond issuance, budget deficits, and fiscal revenue. The Cato Institute, a think tank, warns that large tax rebates will worsen the US fiscal situation. Regardless of the ruling, the market will face significant tariff uncertainty, and attempting to predict future trends is futile.
