After nearly a year of uncertainty around trade policy, the Supreme Court ruled that recent tariffs were unconstitutional, effectively changing the rules of the game. But as is common in Washington, one door closing often leads to another opening. President Trump has already signaled a move to a different legal framework for tariffs, and markets are still working through what this means for trade policy, company profits, consumer spending, and investment portfolios.

For investors, the most important lesson is not the legal ruling itself, but what the past year demonstrates about the value of staying invested. Markets can swing during uncertain times, but they can also stabilize and bounce back when investors least expect it. Tariffs will likely keep making headlines, so understanding the events of the past year can help long-term investors keep things in perspective as the story continues to unfold.

A Year of Tariff-Driven Market Swings

To understand what this ruling means for investors, it helps to first understand the legal tools involved. Presidents have several laws available to impose tariffs, each with different rules about rates, how long they can last, and how broadly they apply.

The so-called “reciprocal tariffs” announced on “Liberation Day” last April were put in place using the International Emergency Economic Powers Act, commonly known as IEEPA. This 1977 law gives the president wide authority to regulate trade during a declared national emergency. In this case, the stated emergency included the country’s long-running trade deficits with many nations, illegal drug trafficking, and immigration concerns.

Here is a summary of the key events:

• On April 2, 2025, the administration announced a baseline 10% tariff on nearly all trading partners, with additional higher rates for specific countries on top of that. Markets reacted sharply, with major indexes falling into correction territory. Investors also feared a period of “stagflation” — a situation where inflation rises while economic growth slows. Historically, this combination has been harmful to both stocks and bonds.
• On April 9, 2025, the administration announced a 90-day pause on the country-specific higher rates, leaving only the baseline tariff in place. Markets began recovering almost immediately and went on to reach new all-time highs within just a few months. Individual trade deals were subsequently reached with various countries and regions.
• On February 20, 2026, the Supreme Court ruled that the administration did not have the legal authority to impose sweeping global tariffs using IEEPA. The ruling reaffirmed that Congress plays the central role in setting trade policy.

Tariffs Are Not Going Away Anytime Soon

The administration had been aware that this type of ruling was a possibility, and alternative legal approaches had already been explored. Following the Supreme Court’s decision, the administration quickly put new tariffs in place using a different law: Section 122 of the Trade Act of 1974. This law was chosen in part because it can apply to multiple countries at once and does not require lengthy investigations that could take months to complete.

Under Section 122, the president can impose tariffs of up to 15% for a period of 150 days without needing approval from Congress. The original intent of this law was to allow presidents to respond to trade imbalances and economic threats without fully bypassing Congress. Historically, it was used during periods when the U.S. dollar was tied to the gold standard and needed protection.

What this means in practice is that while some of the higher tariff rates from 2025 may be reduced, and the new tariffs may only last a few months, tariffs are likely to remain an active policy tool for the foreseeable future. Businesses and investors should expect continued uncertainty around tariff levels and ongoing negotiations with individual countries.

There are also unresolved questions, including whether businesses that paid tariffs under the IEEPA framework will be entitled to refunds, and whether individual Americans might also be reimbursed. In the worst case, it could be years before there is a clear answer. Still, the possibility of refunds could provide a meaningful boost to company earnings, business investment, and household spending power.

The Economy Doesn’t Always Behave the Way Textbooks Predict

Economics is sometimes called the “dismal science” because it has a poor track record of predicting how the economy will respond to major policy changes. When tariffs climbed to their highest levels since the Great Depression, many expected a sharp drop in consumer demand, rising prices, a stronger dollar, and struggling markets.

So why didn’t the worst-case scenario fully play out? First, tariff levels changed quickly and repeatedly. The 90-day pause announced just one week after Liberation Day significantly reduced the actual tariff burden on most trading partners. The highest announced rates never truly took full effect except with a small number of countries.

Second, many companies responded by stockpiling imported goods well before the April deadlines. This was clearly visible in trade data, which showed a large spike in imports during the first quarter of 2025 as businesses rushed to buy ahead of the tariffs. This helped cushion the immediate impact on prices, at least for a time.

Third, and perhaps most importantly for markets, the underlying health of the economy remained solid. Inflation continued to ease, with the Consumer Price Index rising just 2.4% year-over-year in January 2026. Real GDP — the total value of goods and services produced after adjusting for inflation — grew at a modest but healthy 2.2% pace for all of 2025, according to the latest report from the Bureau of Economic Analysis. Corporate earnings also remained strong, supporting stock valuations and long-run growth prospects.

This is not to say tariffs had no impact. The federal government collected hundreds of billions of dollars in tariff revenue, which was ultimately paid by both consumers and businesses. But the experience of the past year is a reminder that economic outcomes are rarely as simple as headlines suggest, and that is precisely why investors should avoid reacting to worst-case scenarios.

The clearest lesson from the past year of tariff uncertainty is one that applies to nearly every period of market and policy disruption: the best thing investors could have done was simply stay invested. Trying to predict the exact effect of tariffs on the economy and markets is not only difficult, but can be counterproductive. As the accompanying chart shows, years with significant market pullbacks during the year have very often still ended with positive returns.

The Bottom Line?

It’s important to separate political views from portfolios and financial plans. Trade policy, legal battles, and political debates matter for taxpayers and voters, but they often lead to the wrong investment decisions. The history of markets shows that economic fundamentals, corporate earnings, and sound investment principles matter far more when it comes to achieving long-term financial goals.

As always, if you have any questions or concerns, please don’t hesitate to contact us anytime.

– Your Wealth Management Team at JJ Burns & Company

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