After the Supreme Court rejected the legal basis for tariffs under the International Emergency Economic Powers Act (IEEPA), the market's focus shifted from &#34;Are the tariffs still in place?&#34; to &#34;Will there be refunds, how will the legal provisions change, and are the trade framework agreements still valid?&#34;
According to CCTV News, the U.S. Supreme Court ruled on February 20 that the Trump administration's imposition of tariffs on U.S. imports under the IEEPA was &#34;illegal.&#34; In a subsequent press conference, Trump responded that he would sign an executive order that day to implement a &#34;10% global uniform tariff&#34; under Section 122 of the Trade Act of 1974 and announced the initiation of several so-called Section 301 investigations.
<h2>Not all tariffs are affected</h2>
According to news from the Chase Trading Desk, HSBC's latest research report cites key points from the ruling, stating that the Supreme Court determined that the IEEPA does not authorize the president to impose general tariffs on imports under the pretext of &#34;emergency.&#34; UBS added in its interpretation that Chief Justice John Roberts, writing for the majority opinion, stated: &#34;The IEEPA does not authorize the president to impose tariffs.&#34;
This means that the tariff system established by the Trump administration using the IEEPA in 2025—first imposing tariffs on Canada and Mexico, and then expanding &#34;reciprocal/equal tariffs&#34; to nearly all trading partners on April 2, 2025—has had its core legal pillar removed.
However, not all tariffs are affected. HSBC emphasized that this ruling does not impact existing:
<ul>
<li>Section 232 (national security, industry tariffs)</li>
<li>Section 301</li>
<li>Section 201 (safeguards, such as solar tariffs in 2018)</li>
</ul>
<h2>Tariff reconstruction rather than overturning</h2>
UBS believes that most IEEPA tariffs can be reconstructed using other trade authorizations, as many U.S. government officials have mentioned in recent months.
Option 1: No alternative sought. The government may choose not to replace the rejected tariffs. In this case, the currently estimated weighted average tariff rate (WATR) of 12.9% would drop to 7.2%. If this lower tariff level persists (although UBS believes this is unlikely), the firm estimates that actual GDP growth this year would increase by about 0.2 percentage points, and PCE inflation would decrease by about 30 basis points. By 2027, this would add about 0.1 percentage points to growth and reduce PCE inflation by about 20 basis points.
Option 2: Plan B However, as the firm previously pointed out, given the government's efforts and emphasis on the tariffs already implemented as an important part of its policy agenda (including recent investment deals linked to trade policy), a &#34;Plan B&#34; is expected. The government has other options.
<ul>
<li>The government could utilize the so-called Section 122 to implement a 15% comprehensive tariff within 150 days.</li>
<li>They may leverage existing findings from Section 301 investigations.</li>
</ul>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/f8a754be-5ef7-42d9-ae05-e1e32050516a.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/f8a754be-5ef7-42d9-ae05-e1e32050516a.png"/>
<h2>10% Global Tariff is Just a Transition, Is the 301 Investigation the Next Card?</h2>
HSBC's latest research report also shows that Trump has announced a &#34;one-size-fits-all&#34; 10% tariff on all countries based on Section 122, and has initiated multiple 301 investigations.
The bank explains that Section 122 can be used to address international balance of payments issues, characterized by: the ability to impose temporary tariffs of up to 15% on all imported goods without a consultation period, but can only be implemented for a maximum of 150 days.
<ul>
<li>No lengthy consultations are required like with industry tariffs;</li>
<li>But it can only be temporarily implemented for a maximum of 150 days;</li>
<li>&#34;Uniformly applicable to all countries&#34; also means it is less suitable as a negotiation lever to pressure a single country.</li>
</ul>
HSBC's core judgment is: Section 122 is more like a &#34;transitional solution.&#34; The reason is that it is &#34;universally applicable,&#34; making it difficult to use as a negotiation threat to &#34;escalate/de-escalate at any time&#34; like IEEPA. A more likely path is: to use Section 122 to hold the time window while pushing for the completion of the 301 investigation, and then switch to a differentiated tariff system.
<h2>Will Refunds Come? Why It May Drag Into &#34;Years of Litigation&#34;</h2>
What the market is most sensitive to is not the &#34;nominal tariff rate,&#34; but whether tariffs already imposed need to be refunded, how much, and how to refund.
HSBC cites estimates that by the end of 2025, IEEPA tariffs will bring in about $133 billion in revenue; if related revenues are retroactively denied, the potential amount that may need to be refunded could reach about $175 billion.
In the disagreement among Supreme Court justices, Justice Kavanaugh in his dissenting opinion reminded: &#34;The U.S. may need to refund billions of dollars to importers who paid IEEPA tariffs.&#34; He pointedly stated that the court &#34;did not provide an operational path&#34;: &#34;The court said nothing today about whether the government will refund the billions already collected, and how.&#34;
Trump, at a press conference, attempted to downplay the short-term impact: &#34;The ruling did not discuss refunds.&#34; He stated that the related issues &#34;are likely to be litigated for more than two years,&#34; implying that the government does not have an immediate large-scale refund plan.
UBS further mentioned that Bloomberg reported that nearly 1,000 companies have filed related cases in the Court of International Trade (CIT) to ensure refund eligibility; the CIT had previously stated that even if tariffs have been settled, the court may still order refunds through reliquidation. But the key is: refund eligibility, scope, and timing still need to be advanced through subsequent judicial procedures.
<h2>Do Those &#34;Bilateral Framework Agreements&#34; Reached Last Year Still Count?</h2>
HSBC points out: the Supreme Court ruling itself did not explicitly address the various arrangements reached over the past year with the UK, EU, Japan, and others. Kavanaugh in his dissenting opinion merely reminded that the ruling &#34;may bring uncertainty to these trade arrangements.&#34;
The more challenging aspect is that these are mostly &#34;framework agreements&#34; rather than complete trade agreements, and the president does not have the statutory authority to unilaterally implement a complete trade agreement. The framework agreements themselves may not necessarily have strong binding force. HSBC cites the example of Japan's framework agreement, where the tax rate &#34;reduced to 15%&#34; is still considered under the IEEPA system according to its understanding of executive orders—if the IEEPA tariffs are deemed illegal, these &#34;post-reduction IEEPA tax rates&#34; may also become invalid.
Trump's statement is that Clause 122 will be &#34;uniformly applicable,&#34; but &#34;some agreements will be retained, and some will not.&#34; One interpretation from HSBC is that the IEEPA tax rates in the framework agreements may be replaced by a unified 10% tariff; however, parts related to the 232 clause limits may still continue—provided that trade partners continue to fulfill their commitments. But if the &#34;threat of higher IEEPA tariffs&#34; is lost, some countries may reassess their existing commitments.
<h2>What it means for the market: Four lines of finance—interest rates—dollar—risk appetite</h2>
1) Finance: After a high increase in tariff revenue, there may be a &#34;reversal risk.&#34;
Data from the U.S. Treasury Department shows that tariff revenue is expected to total $264 billion in 2025 (approximately 0.9% of nominal GDP), significantly higher than $79 billion (0.3%) in 2024. HSBC states that if IEEPA-related revenues are retroactively overturned, approximately $175 billion could theoretically &#34;enter dispute.&#34; However, U.S. Treasury Secretary Yellen stated at an event in Dallas that as the government uses other legal tools, tariff revenue is expected to &#34;almost not change&#34; in 2026.
2) Interest Rates: The core is the marginal increase in deficit and bond issuance demand.
HSBC believes that potential refunds and future revenue declines will increase existing high deficit pressure, pushing the yield curve steeper and tightening swap spreads; however, short-term volatility may be offset by &#34;refund uncertainty + new tariff paths,&#34; and directional trends may be relatively limited.
3) Dollar: Policy noise increases, soft logic strengthens.
HSBC states that this ruling reinforces its judgment of a &#34;soft dollar.&#34; Even if the result is not entirely unexpected, U.S. policy uncertainty may still keep the dollar relatively weak.
4) Risk Assets: HSBC's &#34;risk appetite view remains unchanged,&#34; even marginally positive.
HSBC believes that the ruling has little impact on its &#34;constructive&#34; multi-asset view; rather, because alternative tools are not as flexible as IEEPA, it may reduce the repeated volatility of &#34;tariff on and off,&#34; which is a marginal improvement for the corporate decision-making environment.
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The U.S. Supreme Court ruled that the Trump administration's imposition of tariffs under the International Emergency Economic Powers Act was illegal, and the market is paying attention to the subsequent impacts. Trump will sign an executive order to implement a 10% global uniform tariff. Although the legal basis of the IEEPA has been overturned, the tariffs under Sections 232, 301, and 201 remain unaffected. Analysts from HSBC and UBS believe that the government may choose not to replace the rejected tariffs, which could lead to a reduction in the weighted average tariff rate to 7.2%, impacting GDP and inflation

- The U.S. Supreme Court ruled on February 20, 2026, that tariffs imposed under the IEEPA by the Trump administration were unconstitutional, shifting market focus to refund issues and trade agreements.  
- The ruling indicates that the legal foundation for the tariffs is invalid, although some existing tariffs remain unaffected, and alternative methods for enforcing tariffs are being explored.  
- Concerns about potential refunds for previously collected tariffs may lead to extensive litigation, with estimates suggesting a possible need to return up to $175 billion.

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