Sweeping Tariffs and Oil Price Volatility
The state of the U.S. economy is in disarray due to the war in Iran. Between oil price volatility – Strait of Hormuz disruptions – saturated capital spending on AI, and overall stalled growth, we are in an uphill battle compared to the record-high marks we experienced in 2025. These challenges have presented substantial levels of uncertainty for the American people, and those involved in the Middle East as well.
Moreover, as of Friday, February 20th, 2026, the Supreme Court ruled 6-3 against most of President Trump’s sweeping tariff plans, citing that the 1977 International Emergency Economic Powers Act (IEEPA) did not expressly grant the President authority to enact tariffs on other countries. The IEEPA allows the executive to control the imports of goods but says nothing about tariffs or duties. Those powers lie solely in the legislative branch, as they have the power to, “lay and collect Taxes, Duties, Imposts and Excises” (Article I, Section VIII). Throughout our constitutional jurisprudence, the Supreme Court has consistently labeled tariffs a function of the legislative branch.
Raising Revenue Lost
The Supreme Court’s decision prompted another question: will businesses be reimbursed for the “illegal” tariffs they have paid for the past ten months? That question is yet to be answered, but its impact will be two-fold. Businesses will see streams of cash back on their books, but the American government will need to find an alternative to raising the revenue lost, as Trump’s cash raising plan hinged so much on tariffs.
The New Plan…?
The President’s new plan is to impose a 15% tariff on all imported goods, up from 10%. However, this plan requires congressional approval to extend beyond five months, pushing the decision until the summer, when members of Congress will become hyper-sensitive of tax rates ahead of November’s midterm election. This new imposition
seemingly strengthens China’s hand, but analysts are cautious to say China will leverage their hand because President Trump has other ways of levying taxes on the country. The White House has confirmed that the President will travel to China on March 31 to meet President Xi Jinping.
From an economic standpoint, lower tariffs reduce distortionary costs, promoting efficiency, and lowering prices. Reimbursements for importers will also spur growth; however, uncertainty over future cash flows can distort the implicit value of a company, sending stock prices into volatility. The Administration is attempting to employ Section 122 of the Trade Act of 1974, which allows temporary tariffs in certain economic conditions; the special condition here being the U.S. trade deficit. This new strategy is also receiving pushback, so we are uncertain how alternative tariff plans will work out, especially because the President clearly has no unilateral power here.
The Court’s ruling and the Administration’s goals are at odds, leaving investors in the dark. President Trump is ambitious to enact these tariffs for trading leverage and to decrease the deficit, but these renewed efforts are currently under litigation. During this time, investors must remain comfortable with the lack of visibility in the market for the near future, as we play the waiting game for court rulings on the Administration’s new tariff plans. Markets don’t like uncertainty, but there is light at the end of the tunnel. Stay tuned for our Q1 Commentary in April.
Akili Kelekele is as an Investment Analyst at Allen Trust Company. Akili is a Quantitative Economics graduate from Tufts University. Before joining Allen Trust Company, Akili worked as an Equity Research Associate for D.A. Davidson in New York City.
Disclosure: The information provided in this writing is for general informational purposes only and does not constitute financial advice from Allen Trust Company and Allen Capital Management. Readers are encouraged to consult with a qualified financial advisor to assess their individual circumstances and make informed decisions based on their specific situation.