Morgan Stanley: Peak U.S. tariffs likely behind us after Supreme Court ruling
Feb 23rd 2026
The bank says the court decision that struck down use of IEEPA leaves a weaker, legally vulnerable Section 122 as the fallback, capping tariffs and making refunds uncertain and slow.
- Supreme Court struck down the administration's use of the International Emergency Economic Powers Act, removing the broad legal basis for recent tariffs.
- Morgan Stanley concludes peak tariffs have likely already occurred.
- Section 122 permits up to a 15 percent temporary import surcharge for 150 days but is untested and relies on a balance of payments trigger rather than a goods trade deficit.
- Switching from IEEPA to Section 122 would lower headline tariffs from about 13 percent to roughly 11 percent and could fall to about 6 to 7 percent if Congress does not renew them.
- Tens of billions in tariff revenue already collected face prolonged litigation and refunds would be delayed and paid to companies rather than consumers.
- Morgan Stanley's refund scenarios range from about $56 billion in a limited case to roughly $84 to $85 billion in a midpoint case.
- The ruling substantially reduces near-term risk of runaway tariff escalation and could boost US demand if temporary tariffs expire by mid 2026, while any refund-driven Treasury funding would likely only briefly raise yields.