By Tim Russell (President & Wealth Manager) at Life Financial Group
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Supreme Court Overturns Trump Tariffs
The biggest news this past week came on Friday, when the Supreme Court ruled that President Trump did not have the authority to impose the sweeping tariffs enacted in April of last year. The administration had relied on the International Emergency Economic Powers Act (IEEPA) to authorize the tariffs.
However, a majority of the Justices determined that the president does not have the authority “unilaterally to impose tariffs of unlimited amount, duration, and scope.” That power, they ruled, is reserved for Congress.
In the wake of the decision, several questions remain.
First, how will the Trump administration respond? Early indications suggest they may attempt to use alternative statutory authority to implement an additional 10% across-the-board tariff for 150 days, beginning February 24th at 12:01 a.m.
Second, what happens to tariffs that have already been paid? Will they be refunded? If so, how and to whom? The logistical and legal complexities here are significant.
Third, will Congress take up tariff legislation to formalize the policy? Given the current state of affairs in Washington, that seems unlikely.
Finally, what does this continued “yo-yoing” of U.S. trade policy mean for our global partners? Policy instability makes long-term planning difficult, not only for American businesses but also for international trade relationships.
One positive note is that all of the trade deals that the Trump administration was able to reach with many nations still stands. The Supreme Court decision does not void or invalidate those deals. From one perspective, the Tariffs could be said to be successful because of the lasting impact of the multiple trade deals. It’s likely that these deals will far out last the Trump administration.
GDP Comes in Lower Than Expected
Another surprise this week was the fourth-quarter 2025 GDP report. Consensus estimates projected 2.4% growth, but the economy grew by just 1.4% over the past year.
Some analysts attribute the weaker number largely to reduced government spending during last fall’s shutdown. While that likely had some impact, it is unlikely to be the sole cause.
GDP data are often revised in subsequent months as more complete information becomes available. It would not be surprising to see adjustments as the underlying health of the economy becomes clearer.
Personal Spending Outpaces Income
One final note: personal incomes rose 0.3% last month, while spending increased by 0.4%. Consumers continue to spend at a strong pace.
The excess savings accumulated during the COVID era have largely been depleted, and savings rates continue to decline. Much of the increased spending now appears to be financed through credit cards and buy-now-pay-later programs.
That dynamic raises concerns about sustainability. An economy driven primarily by debt-financed consumption is vulnerable, particularly if employment or credit conditions tighten.
We should encourage savings and debt reduction over non-essential spending, especially for households on the lower end of the income spectrum. Admittedly, that is easier said than done when inflation disproportionately impacts lower-income Americans.
Inflation functions as a regressive tax, falling most heavily on those with the least flexibility in their budgets. When governments rely on inflationary policies to finance spending, it is often the poor who bear the greatest burden.
When governments rely on inflationary policies to finance spending, it is often the poor who bear the greatest burden.
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Disclaimer: The topics discussed here are for informational purposes only and do not constitute specific investment advice. Investing involves risks, including potential loss of principal. Past performance does not guarantee future results. Securities and advisory services offered through Geneos Wealth Management, member FINRA/SIPC.
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