The Supreme Court’s invalidation of tariffs on Feb 20 tossed a hand grenade into a year of trade deals, rekindling worry that the President’s daily tariff missives on social media may spark another bout of Wall Streetvolatility similar to 2025, when the Dow Jones Industrial Average and S&P 500 tumbled 19% after President Trump initially unleashed harsher-than-expected tariffs.
So far, following last week’s Supreme Court decision, President Trump has announced 10% tariffs on imports from around the world under a never-before-used Section 122 of the Trade Act of 1974. Then, within a day, he’s ratcheted them up to 15% — the maximum allowed under the provision. Now, he’s warned countries that bad actors would face even higher tariffs.
The reality: we’ve reentered a period of major uncertainty.
For some countries, the changes mean lower tariffs. For others, it means a potential reshuffling higher. For everyone, the fact that Section 122 tariffs are only good for 150 days means we’re nowhere close to a definitive solution that offers businesses worldwide clarity.
That’s potentially bad news for stocks, as the Dow Jones Industrial Average’s recent action reflects. Despite rising 8% over the past six months, the DJ30 is down 0.6% over the past 30 days, following a 1.6% tumble on Feb 23. Wall Street historically hates uncertainty, especially when stocks are priced to perfection near all-time highs, as they were one year ago and again this year.
Kevin Dietsch / Getty Images.
Tariffs winners and losers emerge
Morgan Stanley updated its views on tariffs over the weekend, and its data crunching shows that a number of countries will see tariffs fall to levels under the International Emergency Economic Powers Act, or IEEPA.
In a report shared with me, their economists say that despite President Trump pulling the Section 122 lever, headline tariffs on imports will slip to 11% from 13%, good news for shoppers and importers’ profit margins.
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The bad news? The economists say that without Section 122 tariffs, the headline tariff rate would be between 6% to 7%.
The savings won’t hit every country or sector evenly, though.
Among the winners are countries hardest hit by IEEPA tariffs– particularly China.
“China is the biggest driver of tariffs, ex Mexico and Canada, where implied tariffs now
decline by almost 7%. Lower China tariffs account for approximately half of the
reduction in headline tariffs,” wrote Morgan Stanley.
Other countries that will see tariffs slip over 5% include South Korea, Singapore, and Vietnam.
Since a lot of the products imported from China are consumer electronics, that sector particularly benefits from the tariff reset (so far). That’s potentially welcome news for players like Best Buy and other consumer electronics-oriented retailers, including online sellers.
Footwear and apparel should also see lower tariffs, at least for now.
Retail shouldn’t expect refund checks anytime soon
Importers, including retailers, hoping to get refunded some of the tariffs paid over the past year might not want to hold their breath.
President Trump said that lower courts will decide the fate of refunds and remarked that the U.S. will be tied up in court for the next five years hashing it out, reported Politico.
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Whether it truly takes that long is anyone’s guess. Morgan Stanley estimates that $85 billion (at the midpoint) could wind up returned to importers, providing a nice bump to earnings… maybe… someday.
“Given the lack of clarity by the Supreme Court, refunds are likely to take a while to reach the economy,” wrote the economists.
What’s the tariff shift mean for the economy
Morgan Stanley says the outcome was in line with its baseline estimate, so it hasn’t adjusted its 2026 figures yet.
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That said, the bank believes the tariff rollback will have a positive impact on inflation, lowering prices and supporting the economy.
“The path to higher tariffs is now more complicated, and the risk skew is to lower tariffs, reinforcing our view for lower US inflation in 2H26,” wrote the economists. “Any incremental uplifts to corporate margins and additional goods disinflation would be further supportive of labor demand and household spending.”
Translation: Lower inflation means more household and business spending, bigger profits, and more hiring.
What’s next for stocks?
The stock market has modeled for IEEPA tariffs, not Section 122 uncertainty. The lack of predictability makes it harder to gauge revenue and profit headwinds and tailwinds, and the mercurial nature of President Trump’s tariff negotiations suggests that on any given day, Wall Street could get blindsided by an unforeseen tariff on a so-called bad actor.
Ultimately, lower tariffs are good for corporate earnings per share, but without certainty, investors will have to reprice risk, and that appears to be what’s happening to stocks right now.
Coupled with a rapid runup in the Dow Jones since the fall (cyclicals and industrials have enjoyed an influx of money as investors have diversified away from technology), you have a recipe for retreat.
The S&P 500, which already slipped because it’s so heavily weighted toward technology, has been propped up until now by other groups, including cyclicals, consumer goods, and industrials. Those baskets have also helped lift the Russell 2000 and equal-weighted S&P 500 index in 2026.
If those stocks lose some luster in the wake of renewed tariff volatility, it could lead the S&P 500, Russell 2000, and Dow Jones lower. Midterm election years are notorious for corrections, with an average 17.5% drawdown at some point ahead of elections, before rallying into year-end, suggesting volatility should be expected and planned for.
“We see risks on tariffs to consumer goods skewed lower in the near, medium and long term, although the range of magnitude is wide and uncertainty remains high,” conclude the economists.
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