The global financial community is focused on One First Street today, February 20, 2026, as the US Supreme Court (SCOTUS) prepares to release its ruling on the legality of President Trump’s sweeping tariff regime.
At 10:00 AM ET (8:30 PM IST), the apex court is expected to announce its decision in Learning Resources, Inc. v. Trump. The verdict will determine if the administration unconstitutionally leveraged the International Emergency Economic Powers Act (IEEPA) to bypass Congress and impose universal duties on global imports.
The Economic Stakes: A $1.24 Trillion Deficit
President Trump remains defiant, dismissing legal skepticism. “The tariffs are the greatest thing to happen to this country,” Trump recently told workers. However, the rhetoric faces a harsh reality with the US Census Bureau revealing that the US goods deficit widened by $25.5 billion in 2025 to reach a staggering $1.24 trillion.
While the administration argues tariffs protect domestic industry, a recent Federal Reserve Bank of New York study found that nearly 90% of the tariff burden falls on US businesses and consumers. National Economic Council Director Kevin Hassett has slammed the research as “partisan” and “an embarrassment.”
The strain on midsize companies
New research from the JPMorgan Chase Institute has reinforced this concern. Tariffs have severely hit the middle-market companies. Those earning between $10 million and $1 billion a year have seen their tariff bills triple over the past year. These firms employ nearly 48 million Americans but do not have the global scale to absorb these costs easily. Most of the burden, around 90%, falls on US businesses and consumers, not foreign producers. The analysis shows that midsize firms’ tariff payments began increasing starting in April and rose from May through November, before declining slightly in December.
Economists estimate that consumer prices are about 0.8 percentage points higher because of the trade war.
Although payments to China have dropped 20%, it’s unclear if supply chains are actually shifting or just rerouting through other countries at higher costs.
JPMorgan’s predicts four possible scenarios
JPMorgan has presented four scenarios for investors bracing for market swings. Here’s a look at the possibilities:
With 66% probability, the institute expects the Supreme Court to find that the tariffs – originally intended for sanctions and asset freezes – do not give the President the authority to levy broad taxes. As a result The S&P 500 would rise +0.75–1%, because a repeal removes a “shadow” of unlimited executive power. However, the gains are capped because the immediate replacement means the actual cost to businesses doesn’t drop significantly; it just changes legal names.
Second scenario is that the court rules that the President has nearly unlimited discretion during a declared national emergency to “regulate” commerce via tariffs. JPMorgan considers this as the most “risk-off” outcome. It cements a permanent, high-tariff environment that is difficult to challenge in court.
With a 9% probablity, JPMorgan outlines the third scenario, where the Court strikes down the tariffs, but the administration faces political or legislative hurdles, perhaps due to internal friction or a busy pre-election schedule, that prevent an immediate replacement.
Fourth scenario is when the Court strikes down the tariffs, and the administration chooses, or is forced by Congress, to move away from the current trade strategy entirely.
“We estimate IEEPA measures account for roughly 61% of the year-to-date increase in US tariffs, or about $180 billion on an annualised basis as of October. However, we do not expect a decision revoking IEEPA tariffs to have a material impact on where the level of the effective tariff rate settles,” Nora Szentivanyi, senior global economist at JP Morgan stated.
What could be Trump’s Plan B: Life after IEEPA
If SCOTUS chooses to scrap the IEEPA tariffs, the administration will have to face a huge problem. It might have to return around $180 billion collected from these tariffs so far. However, the administration still has other legal options. Implementing these alternatives could cause short-term market fluctuations.
For example, the government could use Section 122 to maintain a 15% tariff for 150 days. This would give officials time to set up longer-term tariff plans. “Replacing IEEPA tariffs with a blanket 15% rate could lead to a modest short-term reduction in the effective rate, but much will depend on whether current trade agreements and sector exemptions are upheld,” Szentivanyi explains.
Trump has also suggested that he could convert IEEPA tariffs into import licenses. In an interview with the New York Times in January, he said, “I have the right to license.” The law allows the president to regulate imports “by means of instructions, licenses, or otherwise,” which was discussed during oral arguments before the Court.
According to Bloomberg’s analysis, Trump has at least five alternative statutes he could use to impose tariffs if IEEPA is ruled invalid. Each comes with limits on how fast or high tariffs can be applied:
- These include, Section 232 of the Trade Expansion Act of 1962 (Permits tariffs for national security threats.)
- Another one is Section 201 of the Trade Act of 1974 (Lets the president impose tariffs if imports cause serious injury to US industries.)
- The third option is Section 301 of the Trade Act of 1974 (Authorises tariffs against countries that discriminate against US businesses or violate trade agreements.)
- The fourth one is Section 122 of the Trade Act of 1974 (Addresses balance-of-payments problems, allowing tariffs without federal agency review.)
- And the last, Section 338 of the Smoot-Hawley Tariff Act of 1930 (Allows tariffs against countries imposing unreasonable or discriminatory trade practices.)
But, as easy as it sounds, most of these alternatives cannot be rolled out instantly. Many require investigations, public hearings, or consultations with affected countries. This means any tariffs imposed under these statutes would be more limited and slower than the IEEPA tariffs.
Regardless of the ruling, the transition to these alternative statutes would likely be slow and marked by further legal challenges, ensuring that trade uncertainty remains a dominant theme for the global economy in 2026.