Instead of immediately passing tariff costs to consumers, US corporations are initially absorbing the shock. They are mitigating the impact by reducing labor costs and accepting lower profitability, which explains the lag between tariff implementation and broad consumer inflation.

Even if the Supreme Court rules against the administration, it may not change U.S. tariff levels. The executive branch has alternative legal authorities, like Section 301, that it can use to maintain the same tariffs, making a court defeat less of a market-moving event than it appears.

Stocks most affected by tariffs showed a muted reaction to a pending Supreme Court decision. This suggests investors believe the executive branch could use other authorities to maintain tariffs and that any potential refunds from an overturn would take years to materialize, diminishing the news's immediate market impact.

The inflationary impact of tariffs and anti-migration policies is just starting. Businesses and migrants face complex, irreversible decisions that create a year-long lag before supply shocks and price increases become visible in the broader economy.

While the base case is that the President would replace tariffs struck down by the Supreme Court, there's a growing possibility he won't. The administration could use the ruling as a politically convenient way to reduce tariffs and address voter concerns about affordability without appearing to back down on trade policy.

Because U.S. tariff levels are likely to remain stable regardless of legal challenges, the more critical factor for the long-term outlook is how companies adapt. Investors should focus on corporate responses in capital spending and supply chain adjustments rather than the tariff levels themselves.

The inflationary impact of tariffs is appearing slower than economists expected. Companies are hesitating to be the first to raise prices, fearing being publicly called out by politicians and losing customers to competitors who are waiting out the trade policy uncertainty.

Because tariff-driven inflation on everyday consumer goods has a greater financial impact on middle and lower-income households, any subsequent price relief from a change in tariff policy would provide a more significant economic benefit to these specific demographic groups.

The economic impact of tariffs is not an immediate, one-time price adjustment. Instead, Boston Fed President Collins characterizes it as a "long one-off" process where the full effect can take months or even a year to filter through the economy. This prolonged adjustment period extends uncertainty and complicates inflation forecasting.