After roughly a year of uncertainty surrounding trade policy, the Supreme Court’s decision declaring recent tariffs unconstitutional has fundamentally altered the policy environment. Yet, as is frequently the case in Washington, the conclusion of one chapter marks the beginning of another. President Trump has already indicated a shift toward an alternative legal basis for tariffs, and markets continue to assess what this means for trade policy, corporate earnings, consumer spending, and investment portfolios.

For investors, the most critical insight is not the legal decision itself, but rather what the events of the past year reveal about the value of staying invested. While markets can undergo significant swings during times of policy uncertainty, they are also capable of stabilizing and recovering when investors least anticipate it. Tariffs will likely continue to dominate headlines, and having a firm grasp of what has transpired over the past year can help long-term investors maintain perspective as the next chapter begins.

A year marked by tariff-driven market volatility

To fully appreciate the implications for investors, it is helpful to understand what this ruling actually means. Presidents have access to several legal instruments for imposing tariffs, each carrying different rules regarding rates, duration, and scope.

The reciprocal tariffs announced on “Liberation Day” last April were justified under the International Emergency Economic Powers Act, commonly referred to as IEEPA. This 1977 law grants the president broad authority to regulate commerce in response to a declared national emergency. In this instance, the stated emergency involved the country’s persistent trade deficits with numerous nations, illegal drug trafficking, and immigration concerns.

Below is a summary of the key events:

• On April 2, 2025, the initial announcement included a baseline 10% tariff on virtually all trading partners, with higher country-specific rates layered on top. The immediate market reaction was sharp, producing a correction across major indices. Perhaps more significantly, investors feared that tariffs would give rise to “stagflation,” given that tariffs could push inflation higher while dampening economic growth—a scenario that historically has proven damaging to both stocks and bonds.

• Then, on April 9, 2025, the administration announced a 90-day pause on the country-specific increases, leaving only the baseline rate in place. Markets began to rebound almost immediately and climbed to new all-time highs within just a few months. Trade agreements were subsequently reached with individual countries and regions.

• On February 20, 2026, the Supreme Court ruled that the administration lacked the authority to impose sweeping global tariffs under IEEPA. The ruling reaffirmed Congress’s central role in shaping trade policy.

Tariffs are likely here to stay

The administration had been anticipating the possibility of this ruling, and alternative legal paths for implementing tariffs had been widely explored. Following the Supreme Court’s decision, the administration promptly enacted tariffs under a different statute—Section 122 of the Trade Act of 1974. This law was selected over other options because it can be applied against multiple countries simultaneously and does not require the lengthy investigations and reports that other legal frameworks demand, which could take months to complete.

Specifically, Section 122 permits the president to impose tariffs of up to 15% for a period of 150 days without requiring Congressional approval. The intent of this law was to allow presidents to respond to trade imbalances and threats without completely circumventing Congress. Historically, during the era when the dollar was still backed by the gold standard, there were periods in which this law was needed to protect the dollar’s value.

This means that while some of the higher tariff rates introduced in 2025 may be rolled back and the new tariffs may not last beyond several months, tariffs are likely to remain an active policy tool. Businesses and investors should anticipate continued uncertainty around tariff levels as well as ongoing negotiations with individual countries.

Additional areas of uncertainty remain, including whether and how refunds will be issued. Courts must still determine whether businesses that paid tariffs under the IEEPA framework are entitled to refunds, and whether individual Americans would be included in any such reimbursements. In the worst case, it could be years before clarity emerges. Nevertheless, for businesses and consumers, the prospect of refunds represents a potential tailwind for corporate earnings, capital investment, and disposable income.

Economic outcomes don’t always follow conventional theory

Economics is sometimes described as the “dismal science” given its uneven track record in predicting responses to major policy shocks. When tariffs were raised to their highest levels since the Great Depression, many anticipated demand destruction, rising inflation, a strengthening dollar, and struggling markets.

Why did these fears not fully materialize? First, tariff levels shifted quickly and repeatedly. The 90-day pause announced just one week after Liberation Day dramatically reduced the effective tariff burden on most trading partners, meaning that the highest announced rates never truly went into effect except with a handful of trading partners.

Second, companies responded by stockpiling imported goods well ahead of the April deadlines. This was clearly visible in the trade data, which showed a notable spike in imports during the first quarter of 2025 as businesses front-loaded purchases. As a result, the immediate inflationary impact was at least temporarily cushioned.

Third, and perhaps most consequential for markets, the underlying economic fundamentals remained solid. Inflation continued to moderate, with the Consumer Price Index rising just 2.4% year-over-year in January 2026. Real GDP grew at a modest but healthy 2.2% pace for all of 2025, according to the latest report from the Bureau of Economic Analysis. Corporate earnings also remained strong, supporting valuations and long-run growth prospects.

This is not to suggest that tariffs had no impact. The federal government collected hundreds of billions of dollars in tariffs, costs that were borne by both consumers and businesses. However, the experience of the past year serves as a reminder that economic outcomes are rarely as clear-cut as the headlines imply—which is precisely why it is important for investors to avoid reacting to worst-case scenarios.

The most evident lesson from the past year of tariff volatility is one that applies to virtually every period of market and policy uncertainty: by far the best course of action for investors was to remain invested. Attempting to predict the precise effect of tariffs on the economy and markets is not only difficult but counterproductive. As the accompanying chart illustrates, years that have featured significant intra-year pullbacks have very often still concluded with positive returns.

The bottom line? It’s important to separate political views from portfolios and financial plans. Trade policy, legal battles, and political debates are important for taxpayers and voters, but they often lead to the wrong investment decisions. The history of markets shows that economic fundamentals, corporate earnings, and investment principles matter far more to achieving financial goals.