Trade War D-Day: Markets Brace for Critical Supreme Court Tariff Ruling

Global markets are counting down to a pivotal Supreme Court ruling expected this Friday, January 9. The court will decide on the legality of President Trump's use of the International Emergency Economic Powers Act (IEEPA) to impose sweeping tariffs without Congressional approval.

Scenario Analysis

The decision is a binary event for risk assets, with the consensus leaning toward a 7-2 or 6-3 vote against the administration's broad interpretation of emergency powers.

Scenario A: Tariffs Overturned (Market Favorite)

Scenario B: Tariffs Upheld (The Hawk Case)

The “Plan B” Risk

Even if the court strikes down the current tariffs, Treasury Secretary Bessent has warned that the administration has a “Plan B.” The White House could pivot to Section 232 (National Security) or Section 301 (Unfair Trade Practices) to reimpose duties.

Morgan Stanley strategists note that while a court rejection would spark an initial rally, the gains could be capped by the realization that the trade war is merely changing legal venues, not ending. For Forex traders, the initial knee-jerk reaction in EUR/USD and USD/JPY will be the most tradable moment, followed by a reassessment of the White House's next legal maneuver.