Goldman Sachs and legal experts point out that once the existing tariffs are overturned, the so-called “Plan B” of the Trump administration will enter a legal minefield, making the process extremely complicated. The overall effective tariff rate in the United States could even decrease instead of increase. This article is sourced from an article by Wall Street Insights, organized, translated, and written by Foresight News.
(Background: The Federal Reserve’s leadership change in 2026: The end of the Powell era, with US interest rates possibly being “cut all the way down”)
(Additional background: Trump delivered a national security strategy speech that did not mention cryptocurrencies or blockchain, only discussing “financial innovation”)

Table of Contents

• Litigation Risks Approaching: Anxious President and “Calm” Cabinet
• “Plan B” Is Not Easy: Alternative Solutions Face Numerous Legal Barriers
• Goldman Sachs Forecast: Tariff Rates May Fall, Long Road to Hundreds of Billions in Refunds
• Dual Tests of Political and Diplomatic Credibility

The fate of the Trump administration’s signature tariff policy hinges on a key ruling by the Supreme Court. Although U.S. officials have tried to downplay the potential legal setback, President Trump’s increasingly anxious remarks, combined with market and analyst predictions, point to a growing likelihood: the government may lose the case, and subsequent remedies will be far more complicated than officials have depicted.

This ruling, expected to be announced in January next year, centers on whether the government has the authority under the International Emergency Economic Powers Act (IEEPA) to impose broad “reciprocal tariffs.” Recently, Trump has spoken out fiercely on social media, claiming “evil, hate-filled forces are fighting us in the Supreme Court,” and calling on the justices to “do the right thing for America.” This rare public stance has been interpreted by markets as a deep concern about the potential overturning of his policies.

On November 6, Trump also told reporters that if he loses this case in the Supreme Court, it would be “a devastating blow to our country.” Trump said that if that happens, “we will have to come up with a second plan.”

( Litigation Risks Approaching: Anxious President and “Calm” Cabinet

Currently, market confidence in the Trump administration’s chances of winning the tariff litigation is not high. According to a report by Goldman Sachs issued on December 16, based on questions from Supreme Court justices during oral arguments in November, the Court is “very likely” to rule early next year that most of the tariffs imposed this year are illegal. This view is also reflected in the general market expectations.

The two core cases before the Supreme Court are “Learning Resources Inc. v. Trump” and “V.O.S. Selections Inc. v. Trump,” which challenge whether the president exceeded constitutional limits by using the IEEPA to exercise Congress’s taxing authority.

Faced with the looming risk of losing, public statements from within the White House show a clear disparity. Trump’s words are full of urgency, while officials like Treasury Secretary Mnuchin try to convey a message: even in the worst-case scenario, the government has backup plans.

Mnuchin emphasized national security concerns but also acknowledged the existence of alternatives, implying that the government is preparing for possible defeat. However, this public calm contrasts sharply with court documents claiming that overturning tariffs would trigger a “fiscal disaster.”

) “Plan B” Is Not Easy: Alternative Solutions Face Numerous Legal Barriers

Although government officials claim that they can easily switch to other trade laws to rebuild the tariff system, legal experts and analysts point out that this path is fraught with difficulties. According to Politico, any alternative will face new legal and political obstacles, and the process will not be smooth.

The two main legal tools the government might resort to have significant limitations:

• The Trade Act of 1974, Section 122: This grants the president authority to impose tariffs up to 15% to address “serious balance of payments deficits.” It can temporarily replace the current 10% baseline tariff, but issues include: first, the tariff must be “non-discriminatory,” which conflicts with the Trump administration’s practice of reaching exemptions with specific countries; second, its validity is only 150 days unless extended by Congress, which is almost impossible under current political conditions.

• The Tariff Act of 1930, Section 338: This allows the president to impose tariffs up to 50% on countries that discriminate against US trade. However, this law has never been used since its enactment, and its legal issues have not been tested in court. A key dispute is whether the president must first be investigated by the US International Trade Commission (ITC) before taking action. If an investigation is required, it would take a lot of time, making immediate tariff replacement impossible.

Legal professor Timothy Meyer told Politico that although the US International Trade Court generally shows deference to the executive branch when interpreting tariff laws, every step in activating these alternatives could trigger new lawsuits.

Goldman Sachs Forecast: Tariff Rates May Fall, Long Road to Hundreds of Billions in Refunds

For investors, the most direct impact is changes in tariff costs. Goldman Sachs’s report predicts that if IEEPA tariffs are overturned, the risk will “tend toward lower tariff rates.”

Analyst Alec Phillips pointed out that even if the government switches to Section 122 as a temporary measure, its 15% cap means that higher tariffs currently imposed on some trading partners, such as India, with rates as high as 50%, will have to be lowered. Additionally, imposing higher tariffs under Section 301 on specific countries would require lengthy and complex investigations, which are operationally unfeasible for all trading partners.

Goldman Sachs estimates that by the end of 2026, the effective tariff rate in the US will decrease by about 2 percentage points from current levels.

Furthermore, losing the case would trigger a massive refund issue. Goldman Sachs estimates that the government has collected about $130 billion in tariffs through IEEPA, and this amount continues to grow at about $20 billion per month. Companies like Costco have filed lawsuits to secure refunds. However, the refund process could be very lengthy, requiring subsequent legal actions. According to Politico, the government is rushing to deposit tariff revenues into the US Treasury, a move seen as an attempt to make it more difficult for companies to obtain refunds.

Political and Diplomatic Credibility Double Test

A legal failure would also have serious political and diplomatic consequences for the Trump administration.

Diplomatically, many “trade agreements” reached under the threat of IEEPA tariffs are not legally binding. If the tariff basis is shaken, foreign governments may demand renegotiation and withdraw previous concessions, testing the government’s negotiation ability and credibility.

Domestically, the credibility of high-level officials will be undermined. Several officials, including Mnuchin, have claimed in court documents that overturning tariffs would lead to “domestic and international turmoil.” If such scenes do not materialize after losing the case, they will face accusations of misleading the court and the public. At the same time, this will put Republican lawmakers in an awkward position ahead of the 2026 midterm elections, as they must choose between supporting a tariff policy opposed by about two-thirds of Americans, according to polls, and distancing themselves from Trump.

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