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- The US Supreme Court ruled by six votes to three that President Trump exceeded his authority by invoking the 1977 International Emergency Economic Powers Act (IEEPA) to impose reciprocal tariffs in 2025. The Chief Justice, John Roberts, said: “The president asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration and scope” but noted that he “must identify clear congressional authorisation to exercise it”. The decision strikes down the tariffs imposed under IEEPA, which include the “reciprocal tariffs” unveiled last April along with levies placed on Canada, Mexico and China in relation to the flow of the opioid fentanyl into the US. The Supreme Court left the issue of tariff refunds collected under IEEPA – estimated to be around $142 billion (per US Customs to the end of 2025) – to lower courts. Trump called the Supreme Court judges “disloyal to our constitution” and vowed to continue his tariff regime. On the potential for refunds, Trump said it was “crazy” that the Supreme Court did not address the issue and that “we’ll end up being in court for the next five years”. Trump swiftly responded by invoking Section 122 of the 1974 Trade Act, which allows tariffs of up to 15% for 150 days to address “international payment problems”. These can be extended by Congress. On Friday night Trump announced a 10% global tariff rate; this was swiftly escalated to 15% via social media. He posted on Saturday that he was, “effective immediately, raising the 10% Worldwide Tariff on Countries, many of which have been ‘ripping’ the U.S. off for decades, without retribution (until I came along!), to the fully allowed, and legally tested, 15% level”. For the moment, only the 10% tariff rate is in place via Executive Order. The White House signalled that Trump was still committed to setting a global tariff of 15%, saying “it is being worked on and will come later”, without specifying a timeline.
- President Trump’s State of the Union address saw him lash out at Iran’s “sinister” nuclear ambitions, accusing Tehran of seeking to rebuild its nuclear weapons programme. Trump said the US was negotiating with Iran, but the country was not relinquishing its nuclear ambitions and continued to threaten America. Iran failed to heed warnings to make “no future attempts” to rebuild their nuclear weapons programmes after US strikes in June 2025. Trump now claimed, “they’ve already developed missiles that can threaten Europe and our bases overseas, and they’re working to build missiles that will soon reach the United States of America.” On the US economy, Trump claimed US inflation was “plummeting” and incomes were “rising fast”. However, the most recent CPI print for January showed prices rising at 2.4% year-on-year, and the last time CPI printed below the Federal Reserve’s 2% target was February 2021. Trump said “the roaring economy is roaring like never before” but offered no new policy proposals to address cost-of-living issues.
- President Trump pushed back on reports that the Pentagon was concerned over the difficulties of an extended military campaign against Iran, and said his preference remains to strike a diplomatic deal. Trump said on social media that “everything that has been written about a potential war with Iran has been written incorrectly, and purposefully so. I am the one who makes that decision. I would rather have a deal than not, but if we don’t make a deal, it will be a very bad day for that country and very sadly, its people”. US and Iranian diplomats met for talks in Geneva on Thursday 26 February, with Iran presenting their draft proposals for a nuclear deal and foreign minister, Abbas Araghchi, saying “positions have drawn closer to a mutual understanding in some areas”. Further talks are expected next week. On 19 February Trump said Iran had a maximum of 15 days to reach a deal or “bad things will happen”. In the US, House and Senate Democrats plan to force a vote next week on a bipartisan resolution aimed at blocking Trump from going to war with Iran without Congressional approval.
By the numbers
- 0.83% – the proportion of Ukrainian territory captured by Russia in 2025, according to research from The Economist. President Putin’s “special military operation” in Ukraine saw its four-year anniversary earlier this week. The Economist estimates that Russia is losing far more troops than Ukraine while gaining almost no ground. Their model estimates Russian casualties of between 1.1 million and 1.4 million, of which 230,000-430,000 have been killed in action. This implies that one in 25 Russian men aged between 18 and 49 have been killed or wounded since the start of the war. No major Ukrainian city has fallen since Mariupol in May 2022.
- 1.4% – the annualised pace of economic growth in the US in the final quarter of 2025. This was lower than third-quarter growth of 4.4% and well below expectations. The government shutdown was estimated to have taken a percentage point off growth, much of which will be recouped during the current quarter.
- 4,402 – the majority for the Green Party’s Hannah Spencer in winning the Gorton and Denton by-election The Greens overturned a Labour majority of 13,413 from July 2024, adding to the pressure on Labour leader, Keir Starmer, with his party losing a “safe seat” that it has held for almost a century.
Market movers
Equity markets were little moved by the IEEPA tariff ruling; the potential for refunds may be supportive for earnings, though the timing and scope of the expected legal process means estimating the potential cost is not simple. Likewise, bond markets may have been unsettled by the prospect of lower US government revenues, given IEEPA made up more than 60% of tariff revenues, but the swift use of temporary measures to fill the IEEPA-sized hole calmed any nerves. There remains plenty of uncertainty on where tariff levels will end up, but on the assumption the US will ultimately move to a 15% tariff, the obvious “winners” would be countries with a trade deal with a rate currently above 15%, such as China, India, Brazil, Indonesia and Vietnam. Conversely, the “losers” would be countries trading on the baseline 10% tariff, such as the UK, Australia, Singapore and Chile. Those countries already with a 15% tariff would theoretically see no change, such as Japan, , Switzerland, South Korea and Taiwan as well as the European Union (EU). But as ever it’s not quite so simple – the exemptions and carveouts in place under the old regime may not be carried over to the next.
The investment lens
The Supreme Court ruling did not come as a surprise given the US constitution states that tariffs are the domain of Congress not the president, and that the IEEPA was not intended to be used in this way. It was designed for national emergencies, not to address trade deficits or political polices aimed at bolstering domestic manufacturing.
The rapid policy response from the White House suggests the administration was preparing for such a ruling. While Section 122 is a useful “sticking plaster”, in the longer term the US will make use of the 1962 Trade Expansion Act, of which Section 232 allows (after investigation) certain sectors to be targeted on national security grounds. In addition, Section 301 allows for the investigation and imposition of unlimited tariffs on countries for “unfair trade practices”. Previously, the average investigation under this act has taken nine months. That timescale may well be accelerated for the current purpose. Trump warned that tariffs resulting from the investigations “could be even more severe” than those struck down by the Supreme Court.
There are also question marks over the “deals” negotiated with the US under a tariff regime now deemed unlawful. US Trade Representative Jamieson Greer said the administration intended to “honour” the “legally binding” deals struck under the IEEPA tariffs and expected trading partners to do the same. Still, there may be consequences where such deals have not yet been ratified, such as with the EU and with India. Equally, many countries have promised significant investment into the US as part of these deals; there may be a temptation to move slowly on such commitments given the uncertainty.
Ultimately it is a political decision to push back on these deals or seek to renegotiate. Trump has already warned that any country that wants to “play games” with the “ridiculous” Supreme Court decision would be met with a “much higher tariff, and worse than that which they just recently agreed to”.
In the medium term we anticipate an effective tariff rate in same ballpark as during IEEPA – around 15%, albeit with different mechanisms in place. What does change is that the removal of the IEEPA umbrella takes away a significant policy lever from Trump who has used tariffs as both an economic and foreign policy tool. That doesn’t completely go away, but it will now need to be backed up by investigations and due process, all of which takes time. So, yet more tariff uncertainty, but ultimately not a huge amount will change.
