Recap | 20 February 2026
- 23 minutes ago
- 8 min read
Supreme Court strikes down President Trump's use of emergency tariffs, limiting executive power
US administration to deploy alternative tariff mechanisms in response to ruling
White House weighs limited strikes on Iran over nuclear enrichment
US growth estimates underwhelm as inflation climbs
Equities rally amid tariff volatility while gold and oil edge higher
Federal Reserve officials point to comfort with hold against uncertainty
ECB President Lagarde intends to finish term
Board of Peace launches with aid pledges, eye toward United Nations
Countries navigate relations with China as US asserts interests
Europe plans to bolster defenses with drones and mines
Former South Korean leader sentenced to life for declaring martial law
India joins Pax Silica initiative to strengthen ties with US
Redistricting fulcrum Virginia approves new maps, awaits appeal
Non-public shares and crypto expand exchange trading
WSJ highlights emerging risks in private credit
EDWARD VON DER SCHMIDT
Headlines
Supreme Court strikes down President Trump's use of emergency tariffs, limiting executive power
In a landmark 6-3 decision, the Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were unconstitutional. The ruling turns on the idea that the law does not afford the president the ability to impose taxes without authorization from Congress and that emergencies do not justify bypassing this authorization. Chief Justice Roberts wrote that allowing otherwise would permit "unchecked presidential policymaking". Refunds were not addressed.
The White House used IEEPA to impose tariffs ostensibly intended to curtail fentanyl trafficking and trade deficits as well so-called "reciprocal" and other arbitrary tariffs. The administration contended that these levies were a necessary foreign policy tool within the executive's purview.
Comment:
This decision is perhaps the most consequential of President Trump's second term to date, circumscribing his authority to freely wield his policy lever of choice and materially reducing his negotiating leverage.
Sources:
Supreme Court strikes down Trump's sweeping tariffs, sparking fierce pushback and vow of new levies (AP)
US Supreme Court strikes down Trump's global tariffs (Reuters)
Trump's Global Tariffs Struck Down by US Supreme Court (Bloomberg)
Supreme Court Strikes Down Trump's Global Tariffs (WSJ)
What to Know About the Supreme Court Ruling on Trump's Tariffs (WSJ)
US administration to deploy alternative tariff mechanisms in response to ruling
The White House registered its disappointment with the Supreme Court but vowed to press ahead with tariffs under separate statutes. In a press conference after the SCOTUS decision, President Trump announced that the US would immediately impose a 10% global tariff for 150 days under Section 122 of the Trade Act of 1974, maintaining existing exemptions. These tariffs would require authorization from Congress to be extended.
The administration will also initiate investigations under Section 301 of the Trade Act, which addresses unfair trade practices, and Section 232 of the Trade Expansion Act, which concerns national security interests. Many of the larger tariffs in place use this statute and are unaffected, including those for aluminum, steel, cars, and copper.
The White House is also exploring other avenues to impose tariffs under more durable authority, albeit subject to process and time constraints.
Update: President Trump raised the Section 122 tariffs from 10% to 15% on Saturday.
Sources:
Trump has other tariff options after Supreme Court strikes down his worldwide import taxes (AP)
Trump orders temporary 10% global tariff to replace duties struck down by US Supreme Court (Reuters)
Trump Signs 10% Global Tariff in Bid to Salvage Trade Agenda (Bloomberg)
Trump's Options After the Supreme Court Said His Tariffs Are Illegal (Bloomberg)
White House weighs limited strikes on Iran over nuclear enrichment
The US and Iran are reportedly preparing for armed conflict as negotiations over uranium enrichment remain at an impasse. Diplomatic channels have not closed and Iran intends to submit a draft proposal in the days ahead, but the US is also considering limited strikes to compel terms.
Iran conducted annual drills with Russia on Thursday. Meanwhile, the US continues to move naval assets into the region.
Comment:
If a conflict were to materialize and Iran were to close off the Strait of Hormuz - a vital throughway from the Persian Gulf - the disruption to global oil markets could be severe.
Sources:
Trump warns he's considering limited strikes as Iranian diplomat says proposed deal is imminent (AP)
Trump warns of 'bad things' if Iran doesn't make a deal, as second US carrier nears Mideast (AP; 2/19)
US and Iran slide towards conflict as military buildup eclipses talks (Reuters)
Iran prepares counterproposal as Trump weighs strikes (Reuters)
Exclusive: US strikes on Iran could target individual leaders, officials say (Reuters)
Trump Won't Rule Out Limited Iran Strike as Forces Gather (Bloomberg)
Why US-Iran Tensions Raise Concern Over the Strait of Hormuz (Bloomberg)
Trump Weighs Initial Limited Strike to Force Iran Into Nuclear Deal (WSJ)
Trump Approaches Legacy-Defining Moment on Iran: A Deal or War (WSJ)
Markets & Economies
US growth estimates underwhelm as inflation climbs
US GDP estimates for October through December underwhelmed consensus forecasts, with 4Q growth of 1.4% representing a sharp, shutdown-driven deceleration. Shutdown effects will likely be reversed this year. Private domestic final purchases - the Fed's preferred metric that includes private (non-government) consumption and investment - fell to a still robust 2.4%.
A separate report from the Commerce Department showed that the Personal Consumption Expenditures (PCE) price index rose 2.9% on an annual basis, meaningfully above the Fed's 2% target. Core PCE inflation, which excludes more volatile food and energy categories, climbed to 3%.
Sources:
US economic growth weaker than thought in fourth quarter with government shutdown, consumer pullback (AP)
Inflation rose more quickly than expected in December (AP)
Government shutdown dents US economic growth in fourth quarter; inflation heats up (Reuters)
US GDP Grows 1.4%, Missing Forecasts on Shutdown, Trade (Bloomberg)
Economic Growth Slowed in Fourth Quarter, Hurt by Government Shutdown (WSJ)
See also:
US new home sales fall in December; inventory declines (Reuters)
US business activity growth slows in February, S&P Global says (Reuters)
US Consumer Sentiment Rises Less Than Expected in February (Bloomberg)
U.S. Business Activity Growth Slows as Europe Picks Up Pace (WSJ)
Equities rally amid tariff volatility while gold and oil edge higher
US stock indices continued their march higher notwithstanding tariff headline uncertainty as chip manufacturers extended their relative outperformance. Gold and oil traded higher against dollar weakness as Treasuries sold off.
Comment:
If lost tariff revenue is not replaced, the US will need to raise revenue elsewhere or borrow more to finance planned spending. Greater borrowing needs tend to put upward pressure on Treasury yields, the effective interest rates at which the US government borrows.
Sources:
Wall Street keeps calm after the Supreme Court strikes down Trump's tariffs (AP)
Wall Street ends higher after Supreme Court rules against Trump tariffs (Reuters)
Gold gains over 1% on soft US data, Trump's fresh tariff move (Reuters)
Brent rises late, settles higher and with weekly gain on Iran-US jitters (Reuters)
Stocks Rise Anew, Bonds Fall on Trump Tariff Talk: Markets Wrap (Bloomberg)
Stocks End the Week Higher After Supreme Court Tosses Trump's Tariffs (WSJ)
Dollar Down, Treasury Yields Slightly Up as Trump Vows New Tariffs (WSJ)
Federal Reserve officials point to comfort with hold against uncertainty
Fed officials including Atlanta Fed President Bostic, St. Louis Fed President Musalem, and Dallas Fed President Logan remarked that the Supreme Court's tariff ruling was likely to introduce new uncertainty. They were generally comfortable with the current policy stance absent further improvement in inflation readings.
Sources:
Supreme Court tariff ruling clouds Fed's path after a year of upheaval (Reuters)
Trump, mentioning Fed chair pick, says interest rates should come down substantially (Reuters)
Fed's Musalem Says Outlook Unchanged If Tariffs Replaced 1-for-1 (Bloomberg)
Fed's Logan Notes More Business Uncertainty Following Tariff Decision (WSJ)
ECB President Lagarde intends to finish term
European Central Bank President Lagarde told the Wall Street Journal that her "baseline" expectation is to finish her term at the ECB to ensure that their accomplishments were "really solid and reliable". The ECB and Lagarde did not directly deny an earlier report from the FT that she would consider stepping down early.
Source:
Exclusive: Christine Lagarde Says Her 'Baseline' Is Finishing ECB Term (WSJ; 2/19)
Around the World
Board of Peace launches with aid pledges, eye toward United Nations
President Trump garnered pledges for monetary aid and Gaza's international stabilization force on Thursday. He also discussed a timeline for an Iran agreement and framed his vision for the Board of Peace as "going to almost be looking over the United Nations and making sure it runs properly." (AP)
Sources:
Trump gets pledge for Gaza reconstruction and troop commitments at inaugural Board of Peace talks (AP; 2/19)
At Board of Peace debut, Trump announces global commitments for Gaza reconstruction (Reuters; 2/19)
Countries navigate relations with China as US asserts interests
Ahead of German Chancellor Merz's forthcoming trip to China, Europe continued to wrestle with the need for economic diversification and competing strategic interests vis-a-vis China. With countries such as Japan aligning with the US' security posture, hemispheric considerations have also come to the forefront.
Note that President Trump's summit with President Xi has been scheduled for the end of March.
Sources:
German leader to make his 1st visit to China next week as country seeks 'right balance' in ties (AP)
China cannot profit from low tariffs and shield own market, EU trade chief says (Reuters)
Japan PM Takaichi warns of China 'coercion', vows security overhaul (Reuters)
Trump to travel to China next month, with US trade policy in focus (Reuters)
Trump Will Travel to China in Late March for High-Stakes Xi Meet (Bloomberg)
US Revokes Visas for Chile Officials Over China Cable Plan (Bloomberg)
Europe plans to bolster defenses with drones and mines
The European Group of Five (E5) - France, Germany, Italy, Poland, and the UK - announced that it would work with Ukraine to bolster drone arsenals and defenses. Poland also announced that it would withdraw from an anti-mine treaty in order to fortify its eastern border with Russia.
Sources:
5 European nations pledge millions to use Ukrainian know-how to make cheap drone defenses (AP)
Poland withdraws from treaty banning antipersonnel mines and will use them to defend against Russia (AP)
Europe's main military powers to develop low-cost air-defence systems (Reuters)
Exclusive: Top European spies sceptical US will clinch Ukraine peace deal this year (Reuters; 2/19)
See also:
Hungary Says Will Block Loan to Ukraine Until Oil Flows Resume (Bloomberg)
Former South Korean leader sentenced to life for declaring martial law
Yoon Suk Yeol, the former president of South Korea, was sentenced to life in prison for insurrection and briefly invoking martial law in December 2024.
Sources:
Former South Korean president receives life sentence for imposing martial law in 2024 (AP)
South Korean court hands life in prison to ex-President Yoon for insurrection (Reuters; 2/19)
South Korean Leader Who Declared Martial Law Gets Life Sentence (WSJ; 2/19)
Odds & Ends
India joins Pax Silica initiative to strengthen ties with US
India announced that it would join the State Department's 'Pax Silica' secure supply chain initiative dedicated to safeguarding critical technology resources especially as they pertain to AI.
In a continued rapprochement, the US and India are also exploring sales of Venezuelan oil to reduce India's reliance on Russian crude.
Sources:
India joins US-led initiative to build secure technology supply chains (AP; 2/19)
US negotiating with India on Venezuelan oil sale, US envoy says (Reuters)
U.S. Builds Tech Bloc to Counter China, Adds India as Newest Member (WSJ)
Redistricting fulcrum Virginia approves new maps, awaits appeal
Virginia lawmakers passed new maps in an effort to flip four House seats in the November midterm elections. A proposed referendum to allow the new map was blocked by a state court, however, and is awaiting a ruling on appeal before it can proceed.
Comment:
Amid nationwide gerrymandering efforts, Virginia's seats could prove crucial in a close election with razor-thin House margins.
Sources:
Virginia Democrats pass map that could flip 4 US House seats, if courts and voters approve (AP)
US House campaigns are underway. Yet a redistricting battle triggered by Trump rages in some states (AP)
Non-public shares and crypto expand exchange trading
Expanded exchange trading in private company investment vehicles and cryptocurrency futures aims to facilitate greater liquidity and broader adoption.
Sources:
London Stock Exchange to host first transaction under new private share platform (Reuters)
CME Group Moves Closer to 24/7 Crypto Derivatives Trading (Bloomberg; 2/19)
WSJ highlights emerging risks in private credit
The Wall Street Journal discussed latent risks in retail private credit markets, where interest payments for loans are disbursed as dividends.
Source:
Private-Credit Warning Signs Flash After Blue Owl Unloads $1.4 Billion in Assets (WSJ)
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