Hey Folks, The Supreme Court just dropped a bombshell on Wall Street. In a 6-3 ruling on Friday, the court declared that Trump's sweeping tariffs under the International Emergency Economic Powers Act were unlawful. Chief Justice Roberts wrote the majority opinion, and the key line left no room for interpretation: IEEPA does not authorize the president to impose tariffs. The power to tax belongs to Congress, not the White House.
These IEEPA tariffs were the backbone of Trump's entire trade policy — the Liberation Day tariffs from April 2025 that hit nearly every trading partner. A 10% baseline on most countries, 35% on Canada, and up to 145% on China.
All of it has now been struck down, and according to the Yale Budget Lab, the effective U.S. tariff rate dropped from roughly 17% to 9.1%.
The implications stretch beyond trade policy...
What Happens Now: The Immediate Fallout
The ruling sets off a chain of consequences that investors need to understand:
- Tariff refunds are coming — Penn Wharton estimates over $175 billion in tariffs may need to be refunded to importers. Companies like Costco, Toyota, Nike, and Target have been paying these duties for nearly a year and are now lining up to get that money back.
- The deficit gets worse — These tariff revenues were supposed to offset Congressional tax cuts. With potentially half that revenue gone, the fiscal picture is deteriorating.
- Lower costs for businesses — Lower tariffs mean lower input costs and better margins. Historically, businesses that raise prices tend not to lower them again — meaning shareholders, not consumers, are the most likely beneficiaries.
| | | Trump's Plan B: Section 122 Tariffs
Trump moved fast. Within hours of the ruling, he signed an executive order imposing a 10% global tariff under Section 122 of the Trade Act of 1974 — a law never before used in American history.
He then posted on Truth Social that he would push the rate to 15%. But this backup plan comes with critical limitations:
- Hard ceiling — Section 122 caps tariffs at 15%, a far cry from the 145% rates that were hitting China under IEEPA.
- Built-in expiration — These tariffs automatically sunset in 150 days unless Congress votes to extend them, putting July as the next major deadline.
- Congressional gridlock — Getting an extension through a divided Congress during a midterm year — one that already voted against Trump's tariffs in the Senate — will be extremely difficult.
The net effect is that tariff rates are coming down across the board. Europe drops from 15% to 10%. China goes from over 100% to 35%. The massive tariff headwind Wall Street has been pricing in is weakening significantly.
The Sell America Trade: Overdone and Ready to Reverse
The "Sell America" narrative has dominated financial media for months. It was born in April 2025 when Liberation Day tariffs spooked global markets, accelerated during the Greenland crisis in January 2026, and intensified as Trump pressured the Federal Reserve. Countries have been dumping U.S. Treasuries, the dollar has collapsed year over year, and U.S. assets have been sold across the board.
Three forces have been driving the narrative:
- Policy unpredictability — The constant tariff whiplash made American trade policy fundamentally unreliable. For massive pension funds managing hundreds of billions, that unpredictability is poison.
- Fiscal deterioration — Q4 GDP came in at just 1.4%, well below the 2.5% estimate. A 43-day government shutdown subtracted a full point from growth, and full-year 2025 GDP landed at 2.2%, the slowest since the pandemic.
- Federal Reserve uncertainty — Trump nominated Kevin Warsh to replace Jerome Powell as Fed Chair, but the Senate has not confirmed him yet. Markets are always squeamish during a Fed leadership transition.
But the Sell America trade has a pattern of reversing hard and fast. Liberation Day triggered a massive wave — and within weeks, markets recovered. The Greenland crisis wiped $683 billion from the Mag 7 in a single day, yet Trump backed off within 48 hours and the Dow surged 600 points the next session.
Every time this narrative heats up, quality U.S. stocks get thrown out with the bathwater — not because the businesses got worse, but because of a macro story that historically always fades. | | | Why the Reversal Is Coming Within 45 Days
Four catalysts are converging that could flip this narrative aggressively:
- The Supreme Court just removed the biggest uncertainty — The single largest driver of the Sell America trade was tariff unpredictability. The court has drawn a clear line, delivering the most significant reduction in trade policy uncertainty in over a year.
- Section 122 tariffs are bounded and temporary — A capped, predictable tariff regime is something markets can price. The open-ended chaos driving the narrative has been dramatically reduced.
- Warsh confirmation brings Fed clarity — Once markets understand who is running the Fed and what their policy stance will be, another major uncertainty driver disappears.
- Earnings season resets the narrative — When Q1 results roll in, companies will remind the market that American businesses are still the most profitable on the planet — especially quality growth names sitting 15-25% below recent highs.
Right now, Morningstar shows the entire U.S. market trading at a 5% discount to fair value, with tech at a 16% discount — directly because of the Sell America narrative. U.S. stocks still make up roughly 70% of the MSCI World Index, the country still has the deepest capital markets on Earth, and the AI productivity wave remains centered here.
The Sell America trade may be right on the dollar and on U.S. debt — but when it comes to the most profitable companies on Earth, the smart move may be treating the narrative as a buying signal, not a selling one.
Anyways...
That's all for now!
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