Analysis-Market risk mounts as Supreme Court weighs Trump's emergency tariff powers

Any knee-jerk reaction in equities following the decision could be short-lived, some investors said, ‌cautioning that the administration would quickly use alternative provisions to reimpose the levies if the tariffs are struck down.

"In the short term, this will be noise," said John Pantakidis, a managing partner at Twin Focus Capital. "The market is ignoring that the president keeps threatening more tariffs."

According to David Seif, chief economist for developed markets at Nomura, Trump could turn to five other legal routes to impose tariffs, some up to 15%. "Certainly by the end of 2026, we would have a tariff regime that looks almost exactly the same as what is there," he added.

A POSSIBLE FISCAL FALLOUT

The possibility of lower tariffs, and therefore lower revenues for the government, could put pressure on government bonds pushing their yields higher. High yields can be a headwind for stocks as investor demand shifts to bonds.

Trump ⁠has said it would be an "economic disaster" if the tariffs are overturned. It's not clear whether companies impacted ​by the levies would be entitled to refunds from the government.

Phil Blancato, chief market strategist at Osaic, said a ​ruling requiring refunds could prompt more Treasury issuance.

JPMorgan has estimated that annualized tariff revenue could drop to about $250 billion from roughly $350 billion as the administration pivots to alternative legal avenues that would impose lower rates, reviving worries about the U.S. fiscal outlook.

On prediction markets platforms like Polymarket, a number of gamblers have placed ‍bets on the ruling. For instance, one user account on ⁠Polymarket has built up positions worth nearly $50,000 tied to the Supreme Court's decision, and stands to make a sizable profit if the tariffs are overturned by the court.

If the prediction markets are wrong and the court upholds Trump's tariffs, another market sell-off could follow. Allowing Trump to threaten to impose tariffs in ways that investors view as unpredictable would ⁠unsettle markets, said Alex Morris, chief investment officer at F/m Investments.

Nevertheless, managers like Jensen's Bond have already taken steps to limit tariff-related risks, dropping companies that could be vulnerable.

"Our evergreen strategy is to focus on businesses that have supply ‌chain resiliency," said Bond, adding that it is particularly crucial in a high-tariff environment.

(Reporting by Laura Matthews in New York and Suzanne McGee in Rhode Island; Additional reporting ‌by Davide Barbuscia and Anirban Sen in New York; editing by Megan Davies and Diane Craft)