Supreme Court's Tariff Reversal: Economic Impacts Explored

Cathie Wood's Economic Growth Forecast

Cathie Wood, CEO of ARK Invest, views the Supreme Court's decision to strike down tariffs as a significant economic catalyst. Labeling tariffs as “tax increases,” she argues their removal is akin to a tax cut, which could spur U.S. economic growth. Wood predicts this policy change will reverse recent economic cooling, citing evidence such as the 1.4% real GDP growth in Q4 2025, which she believes was hindered by the tariff regime.

Wood anticipates a sharp drop in inflation, projecting headline inflation could approach zero or even enter negative territory in the coming months. ARK’s internal data, monitoring over 10,000 consumer prices, supports her claim that current inflation is already below 1%. She asserts that eliminating tariffs will provide relief to consumers and businesses, stimulating economic activity. Wood’s outlook aligns with broader market trends, as major indices like the S&P 500 and Nasdaq Composite have posted modest gains year-to-date, reflecting market resilience.

Goldman Sachs on Limited Consumer Benefits

Goldman Sachs economists caution that the Supreme Court’s ruling on tariffs may not deliver immediate benefits to consumers. While tariffs previously raised core inflation by an estimated 0.7%, the bank argues that companies are unlikely to lower prices as quickly as they raised them. Goldman predicts only a marginal 0.1% reduction in inflation for the remainder of 2026, leaving the broader inflation outlook relatively unchanged.

Additionally, Goldman notes the effective tariff rate will decrease from 10% to 9% starting in 2025, but this modest decline is unlikely to significantly impact consumer prices. Treasury Secretary Scott Bessen echoed this sentiment, stating that refunds of the $180 billion collected in tariffs are “unlikely.” The continuation of other trade provisions, such as Section 232 and Section 301 tariffs, further supports Goldman’s assessment that the ruling’s impact on prices will be limited.

Political and Trade Policy Implications

Deputy Assistant Attorney General John Yoo has described the Supreme Court’s tariff ruling as a potential political advantage for the GOP ahead of the 2026 midterms. Yoo suggests that removing tariffs could stimulate the economy, mitigating the effects of the recent slowdown, which saw Q4 2025 GDP growth drop to 1.4%. He views this economic upswing as an opportunity for Republicans to showcase favorable economic policies.

However, uncertainty persists around tariff refunds and trade agreements. While U.S. Customs has ceased collecting tariffs under the now-invalid provisions, there is no clear direction on refunding the collected revenue. Internationally, trading partners such as the European Union and China are pressing for clarity on future trade relations. The Biden administration has pledged to uphold agreements but faces reduced flexibility in negotiating terms. This ongoing uncertainty underscores the complex interplay between domestic policy shifts and international trade dynamics.