Markets brace for US Supreme Court tariff ruling

Legal test of presidential authority rattles investors, write Laura Matthews and Suzanne McGee

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A protester holds a sign outside the US Supreme Court in Washington on Nov 5 last year as justices prepared to hear arguments on President Donald Trump's bid to preserve sweeping tariffs.

(REUTERS)

A forthcoming US Supreme Court decision on President Donald Trump's use of emergency tariff powers could jolt financial markets, especially if the justices strike down the tariffs.

The case is set to determine whether Mr Trump can invoke the International Emergency Economic Powers Act (IEEPA) to impose tariffs without congressional approval.

During November arguments, the justices signalled scepticism about Mr Trump's authority to impose the tariffs. Online betting markets now give a 30% chance that the court will uphold the tariffs.

Striking down the tariffs could impact government revenue, pushing Treasury yields higher and unleashing new waves of volatility across equity markets, analysts and investors said.

"We've never seen a ruling that has such an economic impact," said Eddie Ghabour, CEO of KEY Advisors Wealth Management. "If the Supreme Court rules against the president and makes us (government) pay back all the tariffs that would be a major headwind for markets. This would be the equivalent of sucking liquidity out of the system."