Podcast Summary

Thoughts on the Market

Episode: Why a Tariff Ruling Could Mean Consumer Relief
Host/Speaker: Aruna Masinha, Morgan Stanley US & Global Economics Teams
Release Date: February 13, 2026

Episode Overview

In this concise episode, Aruna Masinha examines how an impending Supreme Court ruling on the president’s authority to impose tariffs under the International Emergency Economic Powers Act (IPA) could significantly impact consumers, retailers, and the broader US inflation outlook. The discussion centers on potential reductions in tariffs for consumer goods and how those changes might flow through to retail prices and margins.

Key Discussion Points & Insights

1. Supreme Court Ruling on Presidential Tariff Authority

• The US Supreme Court is set to rule on whether the president can use the IPA to impose sweeping tariffs.
• Potential Timeline: A decision could come as soon as the following week.
• The IPA currently underpins many consumer goods tariffs.

“The U.S. supreme Court is deciding whether the U.S. president has legal authority to impose sweeping tariffs under IPA… That decision could come as soon as next Friday.” (00:16)

2. Current Tariff Structure and Potential Changes

• Effective Tariff Rates (as of Nov 2025):
  • Consumer goods: ~15%
  • All goods (average): ~10%
• If IPA authority is limited, consumer goods tariffs could fall to the “mid 11%” range.

“In a post IPA scenario, we think that the effective tariff rate on consumer goods could fall to the mid 11% range. It's not zero, but it is meaningfully lower.” (01:04)

• Other tariffs (Section 232 on national security, Section 301 for unfair trade practices) would remain unaffected.
• Autos and metals are largely outside the IPA discussion.

3. Concentration of TARIF Exposure in Consumer Categories

• Category Exposure:
  • Apparel & Footwear: ~60% of tariffs linked to IPA
  • Furniture & Home Improvement: over 70%
  • Toys, Games, Sporting Equipment: more than 90%

“The exposure is really concentrated in certain categories of consumer goods. So for example, in apparel and footwear about 60% of the applied tariffs are IIPA related. For furniture and home improvement it's over 70%. For toys, games and sporting equipment it's more than 90%.” (01:56)

4. Complexity and Policy Caveats

• The Supreme Court’s decision might not be “all or nothing.”
• Policymakers could resort to alternative tariff authorities, such as Section 122, which allows short-term tariffs (up to 15% for 150 days).
• Quickly replacing IPA-based tariffs may not be straightforward given affordability concerns.

5. Economic Impact: Prices & Margins

• Two channels affected:
  • Prices: About 60% of tariff costs are passed on to consumers over 2–3 quarters.
  • Margins: Retail margins could respond faster than prices, giving a temporary profit boost.

“On prices, we estimate that about 60% of tariff costs are typically passed through to the consumers over two to three quarters, but it's not instant. Margins, though, could respond faster if companies get cost relief before they adjust prices downwards.” (03:23)

• This margin tailwind could affect hiring, investment, and earnings in retail supply chains.
• Lower tariffs could help reinforce core goods disinflation, particularly benefitting middle and lower-income households.

6. Timing Matters

• Margin improvements could appear before consumer prices drop.
• The path back to disinflation may quicken if the IPA authority is curtailed.

“At the end of the day, this isn't just a legal story, it is a timing story. If IPA authority is curtailed, the arithmetic shifts pretty quickly. Margins move first, prices follow later, and the path back to goods disinflation could accelerate.” (04:14)

Notable Quotes and Memorable Moments

• “If the Supreme Court limits how [IPA] can be used, tariffs on many everyday items could fall quickly, affecting prices on the shelf, margins for retailers and the broader inflation outlook.” (00:27)
• “There are caveats, of course. The court's decision may not be all or nothing and policymakers could turn to alternative authorities.” (02:25)
• “Lower tariffs could also reinforce that broader return to core goods disinflation starting in the second quarter of this year.” (03:43)
• “Any eventual price relief could disproportionately benefit [middle and lower income] groups.” (03:53)

Timestamps for Key Segments

• 00:16–01:00 — Supreme Court Ruling Overview and Legal Foundation
• 01:04–01:35 — Tariff Rates Today and Potential Changes
• 01:50–02:10 — Tariff Exposure by Category
• 02:25–02:45 — Legal and Policy Alternatives
• 03:23–03:41 — Economic Channels: Prices and Margins
• 03:43–04:14 — Disinflation and Societal Impact
• 04:14–04:31 — Timing Considerations and Conclusion

Summary Flow

The episode provides a clear, data-driven look at the economic consequences of a major Supreme Court decision on tariffs, focusing on the potential for lower prices, improved retail margins, and a boost for core goods disinflation. Masinha’s analysis is succinct yet thorough, highlighting both the mechanics of trade policy and the lived impact for US households, all while underscoring the critical timing of any eventual relief.

For anyone following US trade policy, supply chains, or inflation dynamics, this episode is an insightful listen on why legal decisions far from the retail shelf can have quick, meaningful effects for consumers and companies alike.