President Trump's Tariff Threats and the Supreme Court

January 21, 2026

President Trump made an interesting statement the other day.  When he heard that the French President did not want to join the “Board of Peace”, President Trump said he would put a 200% tariff on French wine to force him to join.  This was only a few days after announcing new tariffs on EU nations who were against his proposal to acquire Greenland.

The President did not cite a legal justification for the tariffs, but the presumption is that he’s again using the 1973 law about economic emergencies to justify them. 

Most reasonable people would say it’s a stretch to call either Greenland or the “Board of Peace” an economic emergency.  They certainly are not trade related.  Rather, it seems that both things are an attempt by the President to use tariffs to influence foreign policy. 

Why is this a problem for the markets?  Well, tariffs are sales taxes.  That’s all they are.  The President setting taxes at his own discretion has an economic consequence.   The US imports roughly $600 billion of goods from Europe every year.  A 25% extra tax on that is roughly $125 billion, or roughly 0.4% of US GDP.  That might not seem like a big amount, but when real GDP is growing 2%-ish, that’s a meaningful cut to be set by a single person.  And that is why the market gets upset about tariffs in the news.

Seeing the problem here, a group of importers filed a lawsuit last year against the President’s ability to use the 1973 law to enact tariffs at his discretion.  Two lower courts have already ruled against the President and his tariffs.  But it’s now at the Supreme Court.  They have had three chances over the past few weeks to announce a ruling.  But they have passed each time.  Some legal observers are suggesting this is a sign that the court is unable to come to a majority ruling and may wait for a “clearer” example. 

Why are we talking about this?  If the Supreme Court refuses to disallow President Trump to use the 1973 law to enact tariffs at  his discretion, then we will likely see an increase in the use of tariffs for non-trade related reasons.  That could add more headwinds to the market this year.

The EU has just announced they are postponing a vote to pass the trade deal (originally made under a handshake agreement last July).