Following the Supreme Court's rejection of the legal basis for IEEPA tariffs, the market's focus has shifted from "whether tariffs remain" to "refunds, alternative legal avenues, and the validity of trade framework agreements." According to reports, the U.S. Supreme Court ruled on February 20 that the Trump administration's use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs on imported goods was "unlawful." In a subsequent press conference, Trump stated he would sign an executive order that same day to implement a "10% universal global tariff" under Section 122 of the Trade Act of 1974 and announced the initiation of multiple so-called 301 investigations.

Not all tariffs are affected. According to analysis, the latest research report from HSBC Holdings PLC cited key points of the ruling, stating the Supreme Court found IEEPA does not authorize the president to impose broad tariffs on imports under the pretext of an "emergency." UBS added in its interpretation that Chief Justice John Roberts, writing for the majority, stated: "IEEPA does not authorize the President to impose tariffs." This means the core legal pillar of the tariff structure built by the Trump administration using IEEPA in 2025—first imposing tariffs on Canada and Mexico, then extending "reciprocal tariffs" to almost all trading partners on April 2, 2025—has been removed. However, not all tariffs are impacted. HSBC Holdings PLC emphasized that this ruling does not affect existing tariffs under: Section 232 (national security, sector-specific tariffs), Section 301, and Section 201 (safeguard measures, such as the 2018 solar tariffs).

The focus is on tariff restructuring rather than a complete overthrow. UBS believes most IEEPA tariffs can be reconstituted using other trade authorities, as many U.S. government officials have suggested in recent months. Option One: The government could choose not to replace the overturned tariffs. In this scenario, the current estimated weighted average tariff rate (WATR) of 12.9% would fall to 7.2%. If this lower tariff level persisted (though UBS considers it unlikely), the bank estimates real GDP growth this year would see an additional increase of approximately 0.2 percentage points, and PCE inflation would be reduced by about 30 basis points. By 2027, this would add about 0.1 percentage points to growth and reduce PCE inflation by roughly 20 basis points. Option Two: Plan B. However, as the bank previously noted, given the effort and importance the administration has placed on implemented tariffs as a key part of its policy agenda (including recent investment deals linked to trade policy), a "Plan B" is expected. The government has other options. It could utilize the so-called Section 122 to impose a 15% comprehensive tariff within 150 days. It might also leverage existing Section 301 investigation findings.

Is the 10% global tariff merely a transitional measure, with Section 301 investigations being the next move? The latest research from HSBC Holdings PLC also indicates that Trump has announced he will impose a 10% "across-the-board" tariff on all countries under Section 122 and initiate multiple 301 investigations. The bank explains that Section 122 can be used to address balance of payments issues and is characterized by: the ability to impose temporary tariffs of up to 15% on all imported goods without a consultation period, but lasting a maximum of only 150 days. It does not require lengthy consultations like sector-specific tariffs; however, it can only be applied temporarily, for a maximum of 150 days; its "uniform application to all countries" also means it is less suitable as a negotiating lever for pressuring individual countries. HSBC Holdings PLC's core assessment is that Section 122 is more like a "transitional measure." The reason is its "comprehensive application" makes it difficult to use for the "threat of escalation/withdrawal at any time" against a single country, unlike IEEPA. A more likely path is using Section 122 to buy time while pushing for the completion of 301 investigations, then switching to a differentiated tariff system later.

Will refunds happen? Why it could drag on into "years of litigation." The market is most sensitive not to the "nominal tariff rate," but to whether already-collected tariffs need to be refunded, how much, and the process. HSBC Holdings PLC cites estimates that by the end of 2025, IEEPA tariffs had generated approximately $133 billion in revenue; if this revenue is retroactively invalidated, the potential refund amount could be as high as about $175 billion. In the dissenting opinion, Justice Kavanaugh warned: "The United States may need to refund billions of dollars to importers who paid IEEPA tariffs." He also pointed out the court provided "no operational path," stating: "The Court says nothing today about whether, or how, the Government will return the tens of billions of dollars it has collected." Trump, at the press conference, attempted to downplay short-term impact: "The opinion did not discuss refunds." He suggested the issue would "likely involve litigation for over two years," implying the administration has no immediate plans for large-scale refunds. UBS further mentioned that Bloomberg reported nearly 1,000 companies have already filed related cases at the Court of International Trade (CIT) to secure refund eligibility; the CIT has previously indicated that even if tariffs have been settled, the court could still order refunds through reliquidation. However, the key point is that refund eligibility, scope, and timing still depend on subsequent judicial proceedings.

Are the "bilateral framework agreements" negotiated last year still valid? HSBC Holdings PLC notes that the Supreme Court ruling itself does not explicitly address the various arrangements reached over the past year with the UK, EU, Japan, and others. Kavanaugh, in his dissent, merely warned that the ruling "could create uncertainty for these trade arrangements." More棘手的是, these are mostly "framework agreements" rather than full trade agreements; the president lacks the statutory authority to unilaterally implement full trade agreements, and the framework agreements themselves may not be strongly legally binding. HSBC Holdings PLC gives the example of the Japan framework agreement, where the "reduction to 15%" tariff rate, based on its understanding of the executive order, still fell under the IEEPA framework—if IEEPA tariffs are ruled illegal, these "reduced IEEPA rates" might also become invalid. Trump's stance is that the Section 122 tariff will be "uniformly applied," but "some agreements will remain, some will not." One interpretation from HSBC Holdings PLC is that the IEEPA-based rates in the framework agreements might be replaced by the 10% uniform tariff; while parts involving Section 232 tariff ceilings might still continue—provided trade partners continue to fulfill their respective commitments. However, without the threat of "higher IEEPA tariffs," some countries might reassess their existing commitments.

What it means for markets: The four channels of fiscal policy, interest rates, the US dollar, and risk appetite. 1) Fiscal Policy: Following a surge in tariff revenue, a "clawback risk" emerges. U.S. Treasury data shows total tariff revenue in 2025 was $264 billion (approximately 0.9% of nominal GDP), significantly higher than the $79 billion (0.3%) in 2024. HSBC Holdings PLC states that if IEEPA-related revenue is retroactively overturned, theoretically about $175 billion could become "disputed." However, U.S. Treasury Secretary Besant stated at a Dallas event that as the administration shifts to other legal tools, tariff revenue in 2026 is expected to see "little to no change." 2) Interest Rates: The core issue is the marginal increase in deficit and borrowing needs. HSBC Holdings PLC believes potential refunds and future revenue decline would add pressure to the already high deficit, pushing for a steeper yield curve and tighter swap spreads; but short-term volatility might be offset by "refund uncertainty + new tariff path," potentially limiting directional trends. 3) US Dollar: Increased policy noise strengthens the case for a softer dollar. HSBC Holdings PLC says the ruling reinforces its view of a "softer dollar." Even if the outcome wasn't entirely unexpected, heightened U.S. policy uncertainty could keep the dollar relatively weak. 4) Risk Assets: HSBC Holdings PLC's "risk appetite view remains unchanged," with a marginal positive bias. The bank believes the ruling has little impact on its "constructive" multi-asset view; instead, because alternative tools are less flexible than IEEPA, they might reduce the back-and-forth volatility of "tariffs being turned on and off," representing a marginal improvement for corporate decision-making environments.