After nearly a year of uncertainty around trade policy, the Supreme Court ruled that recent tariffs were unconstitutional, effectively changing the rules of the game. But as is often the case in Washington, one development quickly leads to another. President Trump has already moved to use a different legal approach to keep tariffs in place, and markets are still working through what this means for trade, company profits, consumer spending, and investment portfolios.

For investors, the most important lesson here is not the legal decision itself, but what the past year has shown about the value of staying invested. Markets can swing sharply when policy is uncertain, but they can also stabilize and recover when investors least expect it. Tariffs will likely continue to make headlines, so understanding what has happened over the past year can help long-term investors keep perspective as the next phase begins.

A year of ups and downs driven by tariffs

To understand what this ruling means for investors, it helps to know a bit about how tariffs — which are fees charged on imported goods from other countries — can be put in place. Presidents have several legal tools available to impose tariffs, each with different rules about how high the rates can be, how long they can last, and which countries they can apply to.

The tariffs announced on "Liberation Day" last April were put in place using a law called the International Emergency Economic Powers Act, or IEEPA. This 1977 law gives the president wide authority to regulate trade when a national emergency has been declared. In this case, the administration pointed to the country’s persistent trade deficits — meaning the U.S. imports more than it exports — as well as illegal drug trafficking and immigration as the basis for that emergency.

Here is a summary of the key events:

• On April 2, 2025, the administration announced a baseline 10% tariff on goods from nearly all trading partners, with even higher rates added on top for specific countries. Markets reacted sharply, with a broad selloff across major stock indexes. Investors were especially worried about “stagflation” — a situation where inflation rises and economic growth slows at the same time. This is historically a difficult environment for both stocks and bonds.

• Then, on April 9, 2025, the administration announced a 90-day pause on the country-specific higher rates, keeping only the baseline 10% in place. Markets began to recover almost immediately and went on to reach new all-time highs within just a few months. Trade agreements were subsequently reached with individual countries and regions.

• On February 20, 2026, the Supreme Court ruled that the administration did not have the legal authority to impose sweeping global tariffs under IEEPA. The ruling reinforced Congress’s central role in setting trade policy.

Tariffs are not going away

The administration had anticipated the possibility of this ruling and had already looked into other ways to keep tariffs in place without relying on IEEPA. Following the Supreme Court’s decision, the administration quickly moved to impose tariffs under a different law: Section 122 of the Trade Act of 1974. This option was chosen because it can be applied to multiple countries at once and does not require lengthy investigations that could take months to complete.

Section 122 allows the president to impose tariffs of up to 15% for a period of 150 days without needing approval from Congress. The original intent of this law was to allow presidents to respond to trade imbalances and threats without completely bypassing the legislative branch. Historically, when the U.S. dollar was still tied to the gold standard, this kind of authority was sometimes needed to protect the currency’s value.

This means that while some of the higher tariff rates introduced in 2025 may be reduced, and the new tariffs may not last more than a few months, tariffs are likely to remain an active policy tool. Businesses and investors should expect continued uncertainty around tariff levels and ongoing negotiations with individual countries.

There are also other open questions, including whether businesses that paid tariffs under the IEEPA framework will be entitled to refunds, and whether individual Americans would receive any reimbursements. In the worst case, it could take years to resolve. Still, the possibility of refunds represents a potential positive for corporate profits, business investment, and household spending power.

The economy does not always behave the way theory predicts

Economics is sometimes called the “dismal science” because it has a poor track record of predicting how the economy will respond to major policy changes. When tariffs were raised to their highest levels since the Great Depression, many experts feared that demand would fall, inflation would rise, the dollar would strengthen sharply, and markets would struggle.

So why didn’t that happen in full? First, tariff levels changed quickly and repeatedly. The 90-day pause announced just one week after Liberation Day significantly reduced the effective tariff burden on most trading partners. The highest announced rates never truly took effect except with a handful of countries.

Second, many companies responded by stocking up on imported goods well before the April deadlines. This was clearly visible in trade data, which showed a large spike in imports during the first quarter of 2025 as businesses rushed to buy ahead of the tariffs. This helped cushion the immediate impact on prices, at least for a time.

Third, and perhaps most importantly for markets, the basic building blocks of the economy remained solid. Inflation has continued to ease, with the Consumer Price Index — a widely used measure of price changes — rising just 2.4% year-over-year in January 2026. Real GDP — a measure of total economic output adjusted for inflation — grew at a modest but healthy 2.2% pace for all of 2025, according to the Bureau of Economic Analysis. Corporate earnings also remained strong, supporting stock valuations and long-run growth expectations.

Of course, this is not to say that tariffs had no impact. The federal government collected hundreds of billions of dollars in tariffs, costs that were ultimately shared by both consumers and businesses. But the experience of the past year is a reminder that economic outcomes are rarely as simple as headlines suggest, and that is why it is important for investors not to react to worst-case scenarios.

The clearest lesson from the past year of tariff-driven market swings is one that applies to nearly every period of uncertainty: by far the best thing investors could have done was to stay invested. Trying to predict exactly how tariffs would affect the economy and markets is not only difficult, but can be counterproductive. As the accompanying chart shows, years with significant drops during the year have very often still ended with positive returns overall.

The bottom line? It’s important to separate political views from portfolios and financial plans. Trade policy, legal battles, and political debates are important for taxpayers and voters, but they often lead to the wrong investment decisions. The history of markets shows that economic fundamentals, corporate earnings, and investment principles matter far more to achieving financial goals.