MARKET BRIEF: TARIFF VOLATILITY AND MONETARY OUTLOOK A landmark U.S. Supreme Court ruling on February 20, 2026, has struck down sweeping Trump-era tariffs, creating a volatile new landscape for global trade. The 6-3 decision determined that the administration overreached its authority by using emergency powers to bypass Congress. This ruling effectively invalidates the "Liberation Day" duties and other levies collected since April 2025. The fiscal implications are immediate. The U.S. Treasury may now be liable for refunds totaling between $142 billion and $175 billion. Analysts suggest this massive capital injection could act as a significant economic stimulus, representing nearly 0.5% of GDP. However, the ruling also erases approximately $1.4 trillion in projected tax revenue over the next decade, complicating long-term federal budget planning. Market relief may be short-lived as the administration pivots to alternative legal pathways. A new 10% global "stopgap" tariff has already been signaled under Section 122 of the Trade Act, which allows for temporary 150-day surcharges. While the average trade-weighted tariff is expected to drop from 15.3% to roughly 8.3% in the near term, businesses remain in a defensive posture due to this "policy whiplash." The Federal Reserve is monitoring these developments closely as it balances cooling inflation with renewed trade uncertainty. January 2026 data showed headline inflation slowing to 2.4%, the lowest level in months. Despite this, core inflation remains sticky at 2.5%, and the potential for a fresh 10% global levy threatens to reignite price pressures in late 2026. Current market pricing indicates that investors still anticipate two rate cuts this year. However, the Federal Reserve’s January minutes revealed a hawkish undertone, with officials concerned that persistent service-sector inflation and shifting trade costs could necessitate holding the federal funds rate at its current 3.5%–3.75% range for longer than expected. Corporate sectors are seeing mixed impacts. Retail and manufacturing firms, particularly in the footwear and automotive industries, stand to gain from potential duty refunds and lowered import costs. Conversely, the uncertainty surrounding the 150-day expiration of new "stopgap" measures is hindering long-term capital expenditure and supply chain restructuring. Investors should watch for the upcoming February CPI release and the implementation of new executive orders. The shift from broad emergency tariffs to targeted national security and "unfair practice" duties suggests that while the total tax burden may decrease, the complexity of navigating U.S. trade policy will remain a primary driver of market risk through the second half of 2026.