Tariff Judgment Trading Guide: If the Supreme Court Says "No," What Other Options Does Trump Have?

Tariff Judgment Trading Guide: If the Supreme Court Says "No," What Other Options Does Trump Have?

According to CCTV News, on January 6 local time, the U.S. Supreme Court announced that it will issue a ruling on tariffs this Friday (January 9). Although the market broadly expects that this ruling, unfavorable to Trump, will boost the stock market in the short term and put pressure on the bond market, investors' focus has quickly shifted to the possible follow-up countermeasures the White House may take.

According to a Wallstreetcn article earlier, the result of the Supreme Court's ruling will profoundly impact market trends. JPMorgan Chase analysis suggests that if tariffs are struck down but immediately replaced—which is considered the most likely scenario—the S&P 500 Index may briefly rally on that day and then retreat. Conversely, if the tariffs are completely removed, this would directly benefit consumer and financial stocks that rely on imports, but could also reignite concerns over the fiscal deficit, complicating the Fed’s rate-cut path and increasing pressure on U.S. Treasuries.

Current prediction market data shows that the probability of Trump's tariff policy being upheld is only 24%. The November 5 hearing indicated that Justices were skeptical of Trump’s authority to impose tariffs under the 1977 Emergency Powers Act. Analysts expect the ruling may see a 7:2 or 6:3 majority against the tariffs.

For traders, the key issue is not just the survival of existing tariffs, but also the speed and effectiveness of the White House's potential “Plan B.” Treasury Secretary Besant stated yesterday that regardless of the Supreme Court’s ruling, the government has alternative legal avenues to maintain its trade agenda. He cited several provisions of the 1962 Trade Act granting the President broad powers over import tariffs, saying:

“We can use Section 301, Section 232, Section 122 to reconstruct exactly the same tariff structure.”

Market Scenarios: From "Relief Rally" to "Buy the Fact"

For equity bulls, the overturning of tariffs would be a clear positive signal. Wells Fargo Chief Equity Strategist Ohsung Kwon previously estimated that if tariffs were canceled, S&P 500 companies' 2026 EBIT would rise by 2.4% compared to last year. James St. Aubin, CIO of Ocean Park Asset Management, believes this will be “a catalyst for a modest rally.”

JPMorgan's Delta-One desk details several possible market reaction scenarios:

Tariffs struck down and immediately replaced (Probability: 66%): This base case could see the S&P 500 rise 0.75%-1% on the news, but as investors realize the government will restart tariffs through other statutes, gains will fade and the index will close only slightly higher.Tariffs upheld (Probability: 24%): This “status quo” scenario may cause the S&P 500 to fall 30-50 basis points that day.Tariffs struck down with no replacement (Probability: 1%): This is the most favorable scenario for stocks, with the S&P 500 expected to rise 1.5%-2%.

In the bond market, JPMorgan strategist Jay Barry and others report that cancelling tariffs could “rekindle fiscal concerns,” driving up long-term yields and steepening the curve. However, this effect is expected to be limited, as the market expects the Trump administration to seek other legal means to restore tariffs. JPMorgan’s team, including Martin Tobias and Matthew Hornbach, notes that since Wall Street has partially priced in the risk, any bond sell-off may be brief, with investors later “buying the fact” and driving yields back down.

Sector Watch: Who Are the Winners and Losers?

If the tariff threat is removed, some sectors will benefit much more than others. Market analysis suggests that companies relying on imported goods, especially those catering to American consumers, will have the most breathing room:

Consumer and Retail: Apparel and toy companies are seen as obvious winners due to their heavy reliance on Asian imports. Stocks previously troubled by tariff uncertainty, such as Nike, Mattel, American Eagle Outfitters Inc., and Crocs Inc., deserve attention. Also, consumer staples like Costco have started responding to this expectation.Finance and Technology: Major banks like JPMorgan Chase and Goldman Sachs could benefit from stronger consumer confidence. Fintech firms such as Affirm Holdings Inc. may also see major volatility.Transport and Industrials: Hedge fund Hedgeye posits that if tariffs are removed and combined with tax cuts boosting the economy, transport stocks like UPS and FedEx would be supported. Caterpillar and Deere could also benefit from tariff rebates.

Conversely, Karobaar Capital CIO Haris Khurshid points out that raw materials, commodities, and domestic producers who benefited from protectionist policies may underperform.

Even if the Supreme Court rules that Trump's use of the International Emergency Economic Powers Act (IEEPA) is insufficiently justified, the Trump administration still has several alternatives, although most have obvious legal or practical flaws.

According to Besant's public statements, the government could use Section 232 of the 1962 Trade Expansion Act, Section 301 of the 1974 Trade Act, and other provisions to “rebuild exactly the same tariff structure.” However, analysts believe these alternatives face many challenges:

Section 232 of the 1962 Trade Expansion Act: Allows tariffs on grounds of “national security” and has been used previously for steel and aluminum. While Trump’s administration might try to broaden the definition of “national security,” including goods like toys, coffee, or T-shirts may seem legally and publicly absurd and trigger new lawsuits.Section 122 of the 1974 Trade Act: Targets countries with large balance of payments surpluses, but is strictly limited: maximum tariff of only 15%, and the term can last no longer than 150 days.Sections 201 and 301 of the 1974 Trade Act: Using these typically requires lengthy investigations (e.g., 150 days), and often requires cooperation from the U.S. International Trade Commission (ITC). With current vacancies in the ITC and its bipartisan nature, full presidential cooperation is not guaranteed.

MishTalk.com analyst Mike Shedlock summarizes that all seven alternative options Trump might try have serious issues. This means that if the Supreme Court rules unfavorably, markets, after an initial knee-jerk reaction, will have to face a longer-term, more complex, and legally contentious trade environment.

Risk Warning and DisclaimerThe market carries risks, and investment requires caution. This article does not constitute individual investment advice, nor does it take into account the special investment objectives, financial situation, or needs of any particular user. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific situation. Investing based on this is at your own risk.