US Supreme Court Rules Trump Tariffs Unconstitutional, Dollar Slips

Summary

On February 20, the U.S. Supreme Court ruled 6-3 that the Trump administration’s large-scale tariff policy, implemented under the International Emergency Economic Powers Act (IEEPA), was illegal because it lacked clear legal authorization from Congress. The decision reversed the dollar’s recent gains, with the DXY index falling over 0.1%.香港无线新闻 This ruling jeopardizes over $1.4 trillion in anticipated future tariff revenue and may require the refund of over $175 billion already collected.

Impact Analysis

So the Supreme Court just pulled the rug out from under Trump’s entire trade doctrine. This isn’t just about the dollar’s knee-jerk drop; it’s a structural shift.香港无线新闻+ 2 They’ve vaporized a projected $1.4 trillion in future government revenue and created a potential $175 billion liability from tariff refunds. This creates a massive fiscal hole. How do they plug it? More debt issuance seems likely, which is a long-term drag on the dollar.

The ruling effectively neuters the executive branch’s ability to use tariffs as a primary tool, forcing them to go through a divided Congress. This introduces significant policy uncertainty and weakens the US negotiating position globally. The market is pricing in the initial shock, but the real story is the coming fiscal strain and policy paralysis. This reinforces our bearish USD thesis. I’d add to shorts against a basket of EUR and EM currencies that benefit from freer trade.