Will the next "black swan" be November 5th?

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After a series of tariff shocks, power struggles between the administration and Congress, and the turmoil of government shutdowns, the U.S. market is approaching another critical juncture—on November 5, the U.S. Supreme Court will hear arguments on the legality of the Trump administration’s series of tariffs.

This ruling could lead to two extremes: If the tariffs are ultimately ruled illegal, the White House may face the embarrassment of having to refund billions of dollars in taxes, sparking chaos in both trade and public finances. Conversely, if the tariffs are ruled legal, the President will obtain near-“monarchical” powers, able to unilaterally impose major economic measures without Congressional approval.

This is not just a legal dispute, but a showdown that will profoundly reshape the boundaries of U.S. presidential power and the future direction of economic policy.

A Judicial Showdown Reshaping Presidential Power

The heart of this judicial battle is the Trump administration’s invocation of the 1977 International Emergency Economic Powers Act (IEEPA) as the legal basis for imposing tariffs.

This act grants the President broad authority in response to a “national emergency,” and the administration opened the door for a slew of tariffs by defining the trade deficit as such an emergency.

The impact has been significant: the tariffs that took effect on April 2 raised the effective U.S. consumer goods tariff rate to 17.9%, the highest since 1934.

The White House is exhibiting strong confidence in the legality of its actions.

Presidential trade adviser Peter Navarro offered three arguments: the trade deficit constitutes an “unusual and extraordinary” external threat; the IEEPA’s text does not explicitly exclude tariffs from the emergency tools available; and these tariffs will be subject to periodic Congressional review.

However, mainstream legal opinion stands on the opposite side.

The majority of legal scholars—including conservatives—believe the government’s legal grounds are quite weak and that defeat is likely. The core logic is the “major-questions doctrine”—any executive action with “vast economic and political significance” must have clear authorization from Congress or the Constitution.

It is worth noting that U.S. Chief Justice John Roberts and other conservative justices have often supported this principle in the past.

The Market’s “Sword of Damocles”

For Wall Street, this lawsuit is a Sword of Damocles hanging overhead, and its verdict points to two diametrically opposed futures.

Currently, the market has to some extent already priced in the impact of the tariffs. For example, Treasury Secretary Scott Besant once predicted that annual tariff revenues over the coming years would exceed $500 billion; this income is seen as helpful in reducing the fiscal deficit, and is one reason U.S. 10-year Treasury yields have stayed around 4%.

Yet, paradoxically, White House advisors insist the tariffs are temporary measures that will end with the “emergency,” while the Treasury has already planned for them as a long-term revenue source—this logical inconsistency exposes the uncertainty of policy.

If the Supreme Court ultimately rules the tariffs illegal, the consequences will be cascading.

First, the White House may have to refund billions of dollars in tariffs to businesses, directly impacting public finances. Second, the Trump administration’s core strategy of unilateral geoeconomic action would be fundamentally shaken. At that point, the government might turn to other legal tools, such as Section 232 of the 1962 Trade Expansion Act, to sustain tariffs. But Section 232 is limited to specific industries, requires a delay before implementation, and is neither as broad nor as flexible as IEEPA. At best, such a switch would cause “logistical turmoil”; at worst, it could result in “policy chaos.”

On the other hand, if the Trump administration wins, the impact will be even more far-reaching.

This would greatly expand the power of the President, allowing for freedom to bypass Congress and unilaterally implement major economic decisions like taxation and capital controls—obtaining a kind of “quasi-royal” authority.

How will the market ultimately react? Perhaps it will absorb this shock as it has others this year and settle down. But there is a risk: should a defeat coincide with rising inflation, worsening employment, and high deficits, the combined effect could trigger dramatic market turbulence.

Risk Warning and DisclaimersMarkets are risky, and investments require caution. This article does not constitute personal investment advice, and does not take into account individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article fit their circumstances. Investing accordingly is at your own risk. ```