Potential Impact of U.S. Supreme Court Ruling on Tariffs Analyzed by UBS

According to BlockBeats, UBS Group has analyzed the potential consequences if the U.S. Supreme Court rules against U.S. President Donald Trump's tariff policies. Such a decision could compel the U.S. government to refund approximately $140 billion in taxes to importers, which is equivalent to 7.9% of the projected federal budget deficit for the fiscal year 2025. A government loss in this case would likely trigger a significant fiscal impact and might lead to the establishment of a structurally low-tariff trade environment. If trade partners do not retaliate, this environment could ultimately benefit the U.S. economy and stock market. UBS suggests that the government might resort to using legal tools such as Sections 201 and 301 of the Trade Act of 1974 to rebuild tariff barriers. However, this process could take several quarters and reduce the flexibility of trade policies. While the refunds would provide a windfall for importing companies, the tariff costs have not significantly lowered the earnings expectations for the S&P 500 index, indicating that the overall market impact might be limited. UBS believes that the ruling could eventually lower the overall effective tariff rate, enhance household purchasing power, alleviate inflationary pressures, and offer the Federal Reserve more room for interest rate cuts. As long as trade partners refrain from escalating countermeasures, this outcome would generally be welcomed by stock market investors.