February 23  , 2026

 

After nearly a year of uncertainty surrounding trade policy, the Supreme Court’s decision declaring recent tariffs unconstitutional has fundamentally altered the policy environment. Yet, as Washington often demonstrates, the closing of one chapter quickly gives way to another. President Trump has already indicated a shift toward an alternative legal basis for tariffs, and markets continue to assess what this development means for trade policy, corporate earnings, consumer spending, and investment portfolios.

For clients, the key takeaway is not the legal decision itself, but rather what the past year reveals about the value of staying invested. Markets can endure significant swings during periods of policy uncertainty, yet they can also stabilize and recover when investors least anticipate it. Tariffs will likely continue to dominate headlines, so a clear understanding of the events of the past year can help clients maintain perspective as the next chapter begins.

A year marked by tariff-driven market volatility

To appreciate the implications for investors, it is helpful to understand what this ruling actually means. Presidents have a range of legal tools at their disposal to impose tariffs, each governed by different rules regarding rates, duration, and scope.

The reciprocal tariffs announced on “Liberation Day” last April were justified under the International Emergency Economic Powers Act, commonly known as IEEPA. This 1977 law grants the president broad authority to regulate commerce in response to a declared national emergency. In this instance, the stated emergency centered on the country’s persistent trade deficits with numerous nations, illegal drug trafficking, and immigration concerns.

Below is a summary of the key events that unfolded:

  • On April 2, 2025, the initial announcement introduced a baseline 10% tariff on virtually all trading partners, with higher country-specific rates applied on top. The immediate market reaction was severe, triggering a correction across major indices. Of greater concern to many investors was the fear that tariffs could fuel “stagflation”—pushing inflation higher while weighing on economic growth—a scenario that historically has been damaging for both stocks and bonds.
  • On April 9, 2025, the administration announced a 90-day pause on country-specific rate increases, leaving only the baseline tariff in place. Markets began rebounding almost immediately and climbed to new all-time highs within just a few months. Trade agreements were subsequently reached with individual countries and regions.
  • On February 20, 2026, the Supreme Court ruled that the administration lacked the authority to impose sweeping global tariffs under IEEPA, reaffirming Congress’s central role in shaping trade policy.

Tariffs are likely here to stay

The administration had anticipated the possibility of this ruling, and alternative legal frameworks for imposing tariffs had been widely examined. Following the Supreme Court’s decision, the administration moved quickly to implement tariffs under a different statute—Section 122 of the Trade Act of 1974. This law was selected over other options because it can be applied to multiple countries simultaneously and does not require lengthy investigations or reports that could take months to complete.

Specifically, Section 122 permits the president to impose tariffs of up to 15% for a period of 150 days without requiring Congressional approval. The intent of this law was to allow presidents to address trade imbalances and potential threats without fully circumventing Congress. Historically, during the era when the dollar was still tied to the gold standard, this law served as an important mechanism for protecting the currency.

This means that while some of the higher tariff rates introduced in 2025 may be rolled back and the new tariffs may not remain in place for more than several months, tariffs are likely to persist as an active policy instrument. Businesses and investors should anticipate continued uncertainty around tariff levels and ongoing negotiations with individual trading partners.

Additional areas of uncertainty remain, including the question of whether and how refunds will be handled. Courts must still determine whether businesses that paid tariffs under the IEEPA framework are entitled to reimbursement, and whether individual Americans would be included in any such refunds. In the most challenging scenario, it could be years before there is clarity on this matter. Nevertheless, the prospect of refunds represents a potential positive for corporate earnings, capital investment, and consumer disposable income.

Economic outcomes don’t always follow the textbook

Economics is sometimes referred to as the “dismal science” due to its limited track record in predicting responses to major policy shocks. When tariffs were raised to their highest levels since the Great Depression, many analysts feared demand destruction, rising inflation, a strengthening dollar, and struggling markets.

Why did these outcomes not fully materialize? First, tariff levels shifted quickly and repeatedly. The 90-day pause announced just one week after Liberation Day substantially reduced the effective tariff burden on most trading partners, meaning the highest announced rates never truly took effect except with a handful of countries.

Second, companies responded proactively by stockpiling imported goods well in advance of the April deadlines. This was clearly visible in trade data, which showed a significant spike in imports during the first quarter of 2025 as businesses front-loaded purchases—cushioning the immediate inflationary impact, at least temporarily.

Third, and perhaps most consequential for markets, the underlying fundamentals of the economy remained solid. Inflation continued to moderate, with the Consumer Price Index rising just 2.4% year-over-year in January 2026. Real GDP 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 valuations and long-run growth prospects.

This is not to suggest that tariffs had no impact. The federal government collected hundreds of billions of dollars in tariff revenue, costs that were absorbed by both consumers and businesses. But the experience of the past year serves as a reminder that economic outcomes are rarely as straightforward as the headlines imply—and that reacting to worst-case scenarios can be detrimental to long-term investment outcomes.

The clearest lesson from the past year of tariff-driven volatility is one that applies to virtually every period of market and policy uncertainty: staying invested has, by far, been the most effective approach. Attempting to predict the precise effect of tariffs on the economy and markets is not only difficult but often counterproductive. As the accompanying chart illustrates, years with significant intra-year pullbacks have very often still concluded 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 are important for taxpayers and voters, but they often lead to the wrong investment decisions. The history of markets shows that economic fundamentals, corporate earnings, and investment principles matter far more to achieving financial goals.

 

 

Taylor Salisbury is a registered representative with, and securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Stratos Wealth Partners, Ltd., a registered investment advisor.  Stratos Wealth Partners, Ltd. is a separate entity from LPL Financial.  Trading instructions sent via email, fax, or voicemail will not be honored.  There is no assurance that these messages can be retrieved on a timely basis, nor is there any sure method of confirming the customer identity. The information contained in this message is being transmitted to and is intended for the use of only the individual(s) to whom it is addressed.  If the reader of this message is not the intended recipient, you are hereby advised that any dissemination, distribution or copying of this message is strictly prohibited.  If you have received this message in error, please immediately delete.

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