Trump's $133B Tariff Gamble: Backup Plans Await Court Ruling

• Supreme Court ruling could upend Trump tariffs, risking $133 billion in refunds.
• Administration eyes alternative tools to sustain $62 billion in 2026 tariff revenues.

Facing a pivotal Supreme Court case that could invalidate Trump-era tariffs, the administration is crafting legal alternatives to sustain $62 billion in revenue amid uncertainty. High-level discussions are centered on preparing for the potential invalidation of tariffs currently enforced under the International Emergency Economic Powers Act (IEEPA).

National Economic Council Director Kevin Hassett emphasized the administration’s readiness, stating that officials possess “other tools” to replicate existing tariff agreements. U.S. Trade Representative Jamieson Greer is expected to lead these contingency efforts, signaling proactive measures to ensure stability regardless of the court’s decision.

As the Supreme Court deliberates the legality of invoking IEEPA for tariff implementation, it faces questions about Congress’s authority to delegate broad tariff powers to the president. Although a ruling was anticipated on January 9, it remains pending, with the next session scheduled for January 14. Treasury Secretary Scott Bessent acknowledged the possibility of a fragmented ruling that might restrict the scope of such powers.

Tariff revenues, which totaled $195 billion in fiscal year 2025 and an additional $62 billion so far this year, are expected to remain stable through alternative legal channels if necessary. Bessent pointed to Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974 as viable options for sustaining revenue streams.

However, the potential for large-scale refunds looms. Should the tariffs be invalidated, importers could claim refunds of over $133 billion, posing significant economic uncertainties. Wall Street betting markets currently estimate the administration’s chances of prevailing in the case at just 28% to 31%.

Economists and market analysts warn of broader implications if the court blocks the tariffs. Jose Torres, a senior economist at Interactive Brokers, noted that such a decision could deepen the budget deficit, disrupt efforts to reshore manufacturing, and alter trade balances. Yet, analysts at Morgan Stanley suggest the ruling may take a nuanced approach, limiting the application of tariffs rather than nullifying them outright.

While initially feared to spur rapid inflation, the tariffs have contributed to narrowing the trade deficit without major economic disruption. However, a Supreme Court ruling against the IEEPA-based tariffs could significantly reshape U.S. trade policy, with profound regulatory and economic ripple effects.