Thomas Funk, Investment Director, Switzerland Equities, assesses the US Supreme Court’s landmark February ruling and its implications for the broader economic and market environment.
12 March 2026
The volatile and legally uncertain tariff environment has recently made reliable planning effectively impossible for many companies. Investment and procurement decisions are being pushed back, and existing value chains are being disrupted and reconfigured, noticeably slowing economic momentum. The US economy is feeling these effects just as acutely as the global manufacturing sector.
The latest US Institute for Supply Chain Management (ISM) Manufacturing Reports underline the depth of the strain. One machinery respondent noted that “the impact of the latest tariff threats on the European Union (EU) will have a huge negative impact on our profit for current quoted orders. We will not be able to recover the increased tariffs in our current quotations.” Across transportation equipment, electronics and fabricated metals, companies consistently highlight delayed orders, margin pressure, sourcing frictions and planning horizons compressed to only a few weeks.1
Against this backdrop of mounting operational uncertainty, the legal framework governing US tariff policy has undergone a profound shift.
A landmark ruling by the US Supreme Court
On 20 February 2026, the US Supreme Court ruled that the president cannot impose tariffs under the International Emergency Economic Powers Act (IEEPA)2. The Court affirmed that while this statute may allow the blocking of economic transactions and the freezing of assets, it does not provide a legal basis for tariffs. In doing so, it reaffirmed a key institutional boundary: far-reaching trade policy measures must rest on an explicit statutory mandate enacted by Congress, not on broad emergency powers.
Tariffs under Section 1223 create uncertainty
In the short term, the Supreme Court’s clarification does not lead to stability, but initially to renewed uncertainty. The US administration turned to Section 122 of the Trade Act, which allows temporary tariffs to address macroeconomic imbalances. However, this measure is limited to 150 days and was never intended to serve as a long-term tariff regime. This creates a legally unclear situation. The US needs a concrete statutory basis to levy tariffs. This cannot simply be established through international agreements. It requires an explicit statutory authorisation to impose tariffs.
For broad-based tariffs, the IEEPA falls away following the Supreme Court’s decision. The chance that Section 122 will be extended by the US Congress at the end of July after the 150-day period seems to be minimal, as is the chance of enacting a new statutory foundation for tariffs. Any such proposals would likely be blocked in the Senate at the latest due to the filibuster rule, which allows a minority of Senators to halt legislation even when a majority supports it. The expiry date of the Section 122 tariffs is likely to prompt companies to keep their foot on the brake in the short term. In principle, however, the legal basis for broad-based tariffs lapses after the end of July.
The US administration has already signalled that it then plans to rely instead on Section 2324 and Section 3015 of US trade law. In its landmark ruling of 20 February, the US Supreme Court also explicitly points to Sections 232 and 301 as the relevant statutory bases for trade-policy measures such as tariffs, signalling that such interventions will in future once again be tied to the existing, clearly defined procedures of US trade law. Sections 232 and 301 therefore create a fundamentally different legal framework from the emergency-based regime under IEEPA previously used by the US administration.
US administrative law as the key
With increasing distance from the ruling, it should become apparent that US trade-policy scope is shifting from what is politically desired to what is legally implementable within the existing legal and administrative framework. Once Section 122 expires, any new tariff action must follow formal administrative procedures, rely on factual substantiation and withstand judicial scrutiny. Section 232 authorises trade policy measures on grounds of national security, while Section 301 can be used to address discriminatory market access and unfair trade practices.
This assessment is based on collected data, structured analyses and consultations with affected companies and relevant institutions. Action can only be taken if an investigation produces clear evidence of an unfair or discriminatory practice.
These determinations, too, are subject to judicial review and to the strict requirements of US administrative law. Agencies may not construct their findings freely or for political purposes; they must rest on a robust factual record and provide a reasoned explanation. In particular, the standard developed under the Administrative Procedure Act (§ 706) and the case law applies: administrative action must not be “arbitrary or capricious” and must be supported by “substantial evidence”, as the Supreme Court clearly confirmed in the landmark case “Motor Vehicle Manufacturers Association v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (1983)”6. This means that an investigation does not automatically lead to tariffs, but only does so if the statutory requirements are met through robust facts and a consistent analysis.
Applying Section 232 and Section 301 to countries such as Switzerland or to the EU is significantly more challenging, because the statutory prerequisites must be demonstrated concretely. Under Section 232 establishing a substantiated link between imports and an actual threat to national security is harder with close security partners. Under Section 301, general regulation is not sufficient; what is required is clearly evidenced discriminatory market access or specific disadvantages to US companies. In open, rules-based markets with low trade barriers, establishing such proof is more complex, which correspondingly limits practical scope. Investigations under Section 232 and Section 301 have been running for many years. New investigations may show that the instruments are partly exhausted and that practical application is limited, because the clearly substantiated use-cases have already largely been addressed.
Will the tariff situation stabilise?
Taken together, the legal, administrative and economic developments point to a fundamental recalibration of US trade policy. Over the coming months, the US Supreme Court ruling should, in our view, noticeably change the trade-policy dynamic and increasingly shift tariff negotiations with the US from the political arena to institutional and technical processes. The broad discretionary scope that enabled sweeping emergency-based tariffs is unlikely to return. Once the broad Section 122 tariffs expire at the end of July, trade actions will again need to proceed through established statutory procedures - primarily Section 232 or Section 301.
In the short term, uncertainty is likely to remain elevated, due to the transition phase and the temporary - and legally fragile - use of Section 122. Courts could even intervene before the 150-day window ends. As the system gradually returns to the established structures under Sections 232 and 301, the contours of the US trade policy should become clearer. This shift should allow companies to make investment decisions based on economic fundamentals rather than political considerations.
An extension of the United States–Mexico–Canada Agreement (USMCA) during the summer without major frictions could further improve planning conditions for companies. The agreement would enable closely integrated North American value chains, particularly in automotive, machinery and electronics. A reliable continuation of this framework would support investment decisions and thereby strengthen economic momentum.
If our assessment of the new legal situation proves accurate, corporate planning visibility should gradually improve in a stabilising environment. This would allow postponed investment and business decisions to be implemented progressively, laying the groundwork for a renewed investment cycle.
Thomas Funk manages Swiss equity strategies at GAM Investments. Read more about Thomas here.