Target Allocation Monthly: tariff workarounds remain

The U.S. Supreme Court’s ruling against the administration’s sweeping use of IEEPA powers to impose its trade policy is less a red light and more a lane change, in our view. The decision also wasn’t a shock (prediction markets have been pricing roughly a 70–75% chance of an IEEPA loss for months), which is why markets have taken the news mostly in stride. Importantly, the administration retains the ability to credibly threaten tariffs under other more methodical statutes. This is why the real-world impact can be understood as a structural shift in the plumbing, not a complete unwind of the administration’s trade agenda: we expect policy could potentially reroute from broad, country-level levies toward more targeted, investigation-driven tools like Sections 301 and 232, with a short-term Section 122-style bridge as needed. The near-term wildcard is refunds, in our view. Estimates suggest a pool as large as ~$175B could be in play. But the mechanics (claims, liquidation timing, and lower-court implementation) could make this more ‘drip’ than ‘deluge.’ For markets, that mix could argue for potentially limited macro shock but bigger sector dispersion: a one-off tailwind for select import-heavy equities and some EM countries, and a higher premium on diversification and active security selection.

Sources: BlackRock, Penn Wharton Budget Model, Yale University Budget Lab, Polymarket, as of 2/25/2026. In a 6-3 ruling on Friday, February 20, 2026, the U.S. Supreme Court decided that the International Emergency Economic Powers Act (IEEPA) does not grant the White House the power to unilaterally impose tariffs of indefinite scope. EM stands for emerging markets. Views are subject to change. Past performance does not indicate future results.

Download the full commentary