So much for 2026 ushering in a period of less trade uncertainty.
The Supreme Court’s eagerly awaited ruling Friday that President Donald Trump overstepped his authority under the International Emergency Executive Powers Act, or IEEPA, in imposing sweeping “reciprocal tariffs” on U.S. trading partners last year will leave farmers sweating over the implications as the administration uses a mix of other trade laws to pursue its central economic strategy.
Trump, chafing at the 6-3 decision, vowed Friday afternoon to immediately slap a 10%, across-the-board tariff on all imports under a different authority known as Section 122 of the 1974 Trade Act, which allows a president to slap tariffs of up to 15% on goods in response to balance-of-payments concerns. But those tariffs have a 150-day limit unless extended by Congress. Trump said using Section 122 would give the administration to pursue investigations under Section 301 of the act, which allow for more permanent tariffs.
Neither the ruling nor the response should have been much of a surprise to investors. Skeptical questioning by several justices, including some members of the court’s conservative wing, had led to widespread expectations, as reflected by betting markets, that the tariffs would be struck down.
Administration officials, meanwhile, had made no secret of the fact they were prepared to use other more cumbersome laws to pursue tariffs in the event of an adverse ruling. The playbook outlined by Trump Friday afternoon had been widely anticipated.
Still, there are plenty of unanswered questions. Foremost for the farm sector is whether the ruling will make China less likely to follow through on what Trump has said is a consideration to buy 8 million metric tons more soybeans on top of the recently completed 12 million metric tons the administration said Beijing agreed to buy after the president and Chinese leader Xi Jinping struck a trade trude last October. And then there’s the 25 million MT China the administration has said China agreed to purchase in this and the next two calendar years.
Soybean futures quickly gave up gains and turned lower after the ruling Friday morning, a move that appeared to reflect fears that the ruling robs beans of their status as a bargaining chip. In the end, losses were modest, with the May contract giving up 2 ¾ cents on the day, leaving the contract with a gain of 4 ¾ cents on the week.
For its part, the American Soybean Association, in a statement ahead of Trump’s appearance, put emphasis on reliable market access as well as the toll that tariffs have taken on producers via higher input costs, urging the administration not to use other avenues to put tariffs on key nutrients and chemicals.
- “Moving forward, certainty and dependable market access are essential for U.S. soy to remain competitive globally,” said ASA President Scott Metzger “Because farmers are caught in a cost-price squeeze and ag input costs remain high, we urge the President to refrain from imposing tariffs on agricultural inputs using other authorities.”
Will there be refunds?: While soybeans remain the poster child of the Trump trade war, the initial reaction across global financial markets signaled a mix of tentative relief but also continued uncertainty, particularly around the potential for rebates that could force the Treasury to return hundreds of billions of dollars in levies.
Stocks rallied after the ruling was announced, gave back some gains ahead of Trump’s news conference, then pushed back to the upside to end solidly higher. The Dow Jones Industrial Average gained 231 points, or 0.5%. The S&P 500 advanced 0.7%, while the Nasdaq Composite was up 0.9%.
Anxiety was more apparent in the bond market, with Treasury yields, which move opposite to price, rising modestly, while the U.S. dollar weakened versus major rivals. The Supreme Court didn’t address the issue of refunds of tariffs paid under the IEEPA tariffs, leaving the question to a lower court.
- “With an estimated $250B of revenues collected since Liberation Day (about $350B annual run-rate), assuming that the Treasury is forced to issue tariff refunds, and the use of tariff revenues to help finance some fiscal stimulus (such as the Big Beautiful Bill), expect Treasury issuance to rise dramatically,” said Gene Goldman, chief investment officer at Cetera Financial Group.
Treasury Secretary Scott Bessent played down the impact on future revenue, saying that tariff revenues under the alternative measures outlined by Trump would be roughly the same.
Don’t forget about Iran: While the tariff ruling and Trump’s response dominated the market chatter Friday, the threat of war in the Middle East also looms over the market. Trump this week said Tehran has 10 to 15 days to come to an agreement on its nuclear program.
The U.S. has built a huge armada of ships and weaponry in the region. Iran earlier this week partly closed the Strait of Hormuz, a crucial maritime transportation chokepoint, in military exercises that also served as a warning.
Oil futures rose sharply this week on fears a conflict could impede crude flows from the region. But the Strait of Hormuz also plays a crucial role in the fertilizer market, as highlighted in a recent note by Scotiabank analysts. They write:
- For context, the Strait of Hormuz represents 25% to 35% of traded ammonia and urea, as well as 20% of both oil and LNG trade…U.S. President Trump recently announced a 25% tariff on anyone doing business with Iran. This mostly includes the founding members of the BRICS alliance, Brazil, Russia, India, and China. To avoid enforcement, countries would presumably stop buying about 6M mt in 55M mt traded market, which is meaningful, in our view.
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