Another Potential Major Disaster: Still Not Visible in the Timeline — Here's a Brief Explanation

Based on the current (November 6, 2025) Supreme Court proceedings, the case mainly involves Trump’s use of the International Emergency Economic Powers Act (IEEPA) of 1977 to impose “reciprocal” tariffs on imports from China, Canada, Mexico, and other countries. Some lower courts have already ruled these tariffs as illegal, and the Supreme Court’s final decision could come within the next few months. If the Court rules these tariffs illegal, it could trigger multiple chain reactions.

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1️⃣ Economic Consequences

1. Economic Shock: Government loses $79 billion in tariff revenue
2. Deficit rises to 7-8% of GDP
3. Increased risk to U.S. sovereign credit rating
4. Average household saves $1,304 in taxes

If ruled illegal, the government will need to refund about $79 billion, which would directly worsen the federal budget deficit. Currently, the deficit is about 6% of GDP; after refunds, it could rise to 7-8%, leading to higher bond yields, market volatility, and potential credit rating downgrades.

2️⃣ Businesses and Consumers
1. Importers receive refunds, reducing costs
2. Short-term economic stimulus of $200 billion
3. Supply chain disruptions in the short term
4. Consumers can seek reimbursement for passed-on costs

3️⃣ Political Consequences
1. Trump’s “America First” agenda faces setbacks
2. Presidential emergency powers could be limited
3. Congress might push new trade legislation
4. US-Canada-Mexico trade agreements could be renegotiated

4️⃣ International Impact
1. Trade partners question U.S. stability
2. Negotiations with China and Europe face obstacles
3. Geopolitical chain reactions

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Who Gets the Refund, and How Much?

1. Importers who paid IEEPA tariffs
2. Includes 12 states’ plaintiffs and national companies
3. Must provide proof of payment (e.g., import date, amount)

Refund scale: total could reach hundreds of billions of dollars (the 2025 IEEPA tariffs amount to about $79 billion), depending on proof of payment. A historical example is the 2006 softwood lumber dispute with Canada, where refunds totaled $1 billion.

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Most Importantly

Where does the money come from?

1. The Treasury has already collected tariff reserves
2. Insufficient? Issue government bonds to cover the deficit
3. Process: could take months to years

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And all of this is currently being ignored by the market.

The Supreme Court’s ruling could become the final straw that breaks Trump’s political back.