Stocks close higher after Trump tariffs encounter skeptical Supreme Court
The Supreme Court heard oral arguments about Trump's tariffs on Wednesday.
Stocks closed higher on Wednesday after some conservative justices on the Supreme Court voiced skepticism about the lawfulness of President Donald Trump's steepest tariffs, raising the possibility the policies could be struck down.
The Dow Jones Industrial Average closed up 225 points, or 0.4%, while the S&P 500 jumped 0.3%. The tech-heavy Nasdaq increased 0.6%.
Trump has ratcheted up tariffs in recent months, in part due to powers invoked under the International Emergency Economic Powers Act (IEEPA), the legal authority at issue before the Supreme Court.
The major stock indexes fell dramatically after Trump unveiled far-reaching tariffs in April, but markets recovered to new highs over the ensuing days and weeks after Trump eased the policy. The Dow Jones Industrial Average has climbed about 11% so far this year, while the S&P 500 has jumped 16%.
Still, the levies have coincided with an uptick of inflation and a slowdown in hiring, posing a risk of an economic double-whammy known as "stagflation."
Trump is the first president to try use the IEEPA to set tariffs without Congress, and the justices pushed Solicitor General John Sauer to justify the sweeping authority.
Sauer argued the tariffs are "regulatory" in nature, and that any revenue raised is incidental. That, despite Trump often boasting about the billions of dollars he says the administration has raked in as a result of the levies.
Sauer then faced a barrage of questions from the justices, including several conservatives, who appeared skeptical of Trump’s tariff authority under IEEPA.
As part of the case, the nation’s highest court will weigh in on the lawfulness of levies on dozens of countries unveiled in a Rose Garden ceremony that Trump dubbed "Liberation Day." The case also concerns tariffs imposed on China, Mexico and Canada, as well as a baseline 10% levy slapped on nearly all imports.
If the Supreme Court allows Trump’s steepest tariffs to stand, price increases may accelerate while economic uncertainty associated with the tariffs could put downward pressure on hiring, some economists previously told ABC News.
But some economists said the Supreme Court case would have little effect on inflation or interest rates due to the sheer size and inertia of the U.S. economy, as well as the Trump administration’s plans to impose tariffs under other legal authorities.
Trump would still retain the power to levy sector-specific tariffs and impose a 15% tariff for up to 150 days under the Trade Act of 1974, which allows the president to address trade disparities with other countries.
Tariffs stand at an overall average effective rate of 17.9%, the highest since 1934, the Yale Budget Lab reported last week. Price levels are expected to climb incrementally this year as a result of the levies, representing a loss of about $1,800 for the average household, the group said.
ABC News' Devin Dwyer and Peter Charalambous contributed to this report.
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