The US Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA). The ruling is expected to cut the US average effective tariff rate in half.
Tariff revenues collected in 2025 totalled nearly $290bln. The administration has used customs duties as a fiscal buffer, linked in part to the costs of the One Big Beautiful Bill Act.
Shift Toward Alternative Tariff Authorities
With IEEPA tariff use curtailed, attention is turning to other legal tools. Section 232 is described as allowing uncapped tariffs, including no stated limit on rate or duration.
Existing sectoral tariffs cover areas such as metal products, autos and lumber. Further sector-based tariffs may be added as the White House runs new trade reviews similar to the process used before “Liberation Day”.
The Supreme Court’s decision on Friday creates significant uncertainty, and we should anticipate a surge in market volatility as the administration shifts its trade strategy. The key play in the coming weeks will be in options, as the market reprices risk across different sectors. Look for elevated premiums on the VIX, recalling the trade disputes of last year when we saw volatility indices spike by over 15 points in a matter of days following similar announcements.
This policy shift creates clear winners and losers in the short term. Companies that were heavily impacted by the now-voided IEEPA levies may see a relief rally, while sectors flagged for new Section 232 investigations will face immediate pressure. We are focusing on sectors with high import volumes, such as electronics and industrial machinery, which U.S. Census Bureau data from late 2025 showed accounted for over $900 billion in annual imports.
Positioning For Sector Specific Tariff Risk
We should position for targeted tariffs on new product groups beyond the existing ones on metals and autos. Given the Commerce Department initiated a Section 232 investigation into foreign-made semiconductors and EV battery components just last month, puts on technology and automotive ETFs could be a prudent hedge. The administration’s need to replace the nearly $290 billion in tariff revenue collected in 2025 makes these high-value import sectors prime targets for new levies.
Expect this uncertainty to spill into foreign exchange markets as well. The U.S. dollar will likely see increased volatility against the currencies of major trading partners, particularly the euro and Mexican peso, whose trade surpluses with the U.S. grew by 4% and 6% respectively in the last quarter of 2025. Trading strategies using options on currency ETFs can help manage risk from these sudden policy-driven shifts.
