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🦔 Hey everyone, Hedgie here. Hope you had a good week. A bit of a shorter letter this week, but let's get into it.
Supreme Court Strikes Down IEEPA Tariffs
The Supreme Court struck down the administration's global tariffs on February 20 in a 6-3 ruling, finding that the President exceeded his authority by invoking the International Emergency Economic Powers Act. The administration responded immediately by imposing 15% tariffs on all trading partners under Section 122 of the Trade Act of 1974, which can be implemented without a federal investigation but only lasts 150 days without Congressional approval.
Region | Description |
|---|---|
Brazil | 40% reciprocal, subject to exemptions for agricultural goods. |
Canada | 0% reciprocal (exempt); 0% on USMCA-duty-free; 10% energy/potash; 35% other non-USMCA; USMCA goods duty-free |
Mexico | 0% reciprocal (exempt); 0% on USMCA-duty-free; 10% potash; 25% other non-USMCA; USMCA goods duty-free |
China | 10% reciprocal baseline; higher China rate delayed; addition “fentanyl” 10% (stacks regardless of other tariffs) |
European Union | Formula reciprocal rate, typically 0–15% |
United Kingdom | 10% reciprocal |
Trade-deal partners (Japan, Korea, Vietnam, etc.) | Reciprocal rates mostly in 15–25% range |
Other | Mostly 10% reciprocal; some countries 15–40% |
Source: Yale Budget Lab |
The Penn-Wharton Budget Model estimates about $175 billion has been collected from IEEPA tariffs so far. The Yale Budget Lab estimates these tariffs made up about 60% of current tariffs on US imports, and their removal drops the effective tariff rate from 16.9% to 9.1%, though that's still near the highest rate in decades.
The administration plans to use the next 150 days to conduct investigations under Section 301 and Section 232 to justify reimposing tariffs. Section 301 targets unfair trade practices and was used against China in 2018. Section 232 covers national security concerns and currently applies to steel, aluminum, and semiconductors. Neither has rate caps but both require federal investigations.
Alternative options to IEEPA-based tariffs:
| Reason for imposing tariffs | Federal agency investigation required? | Limit on duration of action | Limit on tariff rate |
|---|---|---|---|---|
Section 122 | International payments problem | No | 150 days. Can be extended with Congressional approval. | 15% |
Section 301 | Discrimination against US businesses or violation of US rights under trade agreements | Yes, by US Trade Representative | Four years. May be extended with no maximum limit. | None |
Section 232 | Threat to national security | Yes, by Commerce Department | None | None |
Section 338 | Discrimination against US commerce | No | None | 50% |
Section 201 | Injury to domestic industry | Yes, by International Trade Commission | Four years. May be extended to a maximum of eight years. | 50% increase. Phasedown required after one year. |
GDP Miss and Inflation Tick Up
US GDP grew just 1.4% in Q4 2025, well below the 2.8% economists expected and down sharply from 4.4% in Q3. The government shutdown, which lasted almost half the quarter, subtracted about 1 percentage point from growth. For the full year, the economy expanded 2.2%.
Core PCE inflation rose 0.4% in December, the largest monthly increase in nearly a year. On an annual basis it climbed to 3%, up from 2.8% at the start of 2025.
My Take
The market is treating the Supreme Court ruling as a nonevent because everyone expected it and the administration's response was predictable. The 15% Section 122 tariffs are roughly in line with current rates so there's no immediate disruption. But the real question is what happens over the next 150 days. That window runs right into midterm season, and Congressional appetite for raising tariffs again might be low.
The GDP miss is mostly shutdown noise, but the inflation number matters more. Core PCE moving in the wrong direction complicates the Fed's path to rate cuts. Markets still expect cuts starting in summer, but that gets harder to justify if inflation is reaccelerating. Affordability remains a problem for most households and is shaping up to be the central issue for midterms.
I'm watching whether the administration can build the legal foundation for broader tariffs before political pressure kicks in, and whether the December inflation reading was a blip or the start of something stickier. The headline data looks stable enough, but there's still a gap between the macro numbers and how people actually feel about the economy.
Week Ahead
PPI inflation data and home price numbers are the main releases. If PPI comes in hot, expect the rate cut narrative to get pushed back further.
Weekly Market Stats
Index | Close | Week | YTD |
|---|---|---|---|
Dow Jones Industrial Average | 49,626 | +0.3% | +3.3% |
S&P 500 Index | 6,910 | +1.1% | +0.9% |
NASDAQ | 22,886 | +1.5% | -1.5% |
MSCI EAFE | 3,141.50 | +0.8% | +8.6% |
10-yr Treasury Yield | 4.08% | 0.0% | -0.1% |
Oil ($/bbl) | $66.38 | +5.5% | +15.6% |
Source: FactSet, Morningstar Direct, February 22, 2026.
Hedgie 🦔
Disclaimer: I'm a hedgehog on the internet, not a financial advisor. Nothing in this newsletter is financial advice. I share what I'm seeing and thinking, but you should always do your own research and consult with a qualified professional before making any investment decisions.
