Abstract
This case study analyses the differential market reactions across Asian financial centres following the United States Supreme Court’s landmark ruling on February 20, 2026, which struck down President Donald Trump’s Liberation Day tariffs imposed under the International Emergency Economic Powers Act (IEEPA). The ruling precipitated a rapid policy response from the executive branch, culminating in the announcement of a flat 15% global tariff under an alternative statutory framework. Drawing on intraday market data, analyst commentary, and official government statements, this study examines the heterogeneous equity market responses in Singapore, Hong Kong, South Korea, India, Malaysia, and Australia. It further investigates the structural implications for Singapore’s trade-dependent economy, which occupied an anomalous position as a low-tariff jurisdiction under both the old and new regimes. The findings suggest that while the court ruling modestly reduced systemic trade policy uncertainty, the executive’s rapid recourse to alternative legal authority substantially attenuated market relief — reinforcing the thesis that judicial constraints on trade unilateralism are necessary but not sufficient to alter the broader trajectory of US protectionism.
Keywords: tariff policy, IEEPA, US Supreme Court, Singapore equity markets, trade uncertainty, Liberation Day tariffs, Asian financial markets
- Introduction
The administration of President Donald Trump has consistently deployed trade policy as a strategic instrument, introducing considerable volatility into global financial markets since his return to office in January 2025. The so-called ‘Liberation Day’ tariffs, announced in April 2025 and predicated on the emergency authority conferred by the International Emergency Economic Powers Act of 1977, represented the most expansive unilateral trade action in post-war American history, imposing levies ranging from 10% to 50% on goods imported from virtually all trading partners.
The United States Supreme Court’s ruling of February 20, 2026 — holding that IEEPA does not confer upon the President the authority to impose broad-based import tariffs — constituted a constitutionally significant circumscription of executive trade power. Financial markets, however, were offered only limited relief: within 24 hours of the ruling, the administration announced a replacement tariff of 10%, subsequently revised upward to 15%, under the Trade Expansion Act of 1962, Section 232, and other available statutory instruments.
This case study examines the immediate and medium-term market implications of this sequence of events, with particular attention to Singapore’s Straits Times Index (STI) and the specific structural challenges facing a city-state whose trade-to-GDP ratio exceeds 300%. - Background and Legal Context
2.1 The International Emergency Economic Powers Act and Liberation Day Tariffs
The IEEPA, enacted in 1977, grants the President broad authority to regulate international commerce in response to an ‘unusual and extraordinary threat’ to national security, foreign policy, or the economy. The Trump administration invoked IEEPA in April 2025 to justify sweeping tariff schedules — a legal theory that had not previously been tested at the Supreme Court level and that many constitutional scholars regarded as a substantial overreach of the statute’s intended scope.
The tariff schedule imposed under IEEPA was asymmetric by design: countries with which the United States maintained persistent trade deficits received higher rates, creating a differentiated regime in which China and India faced levies of up to 34% and 26% respectively, while smaller, trade-surplus nations such as Singapore were assessed at the baseline rate of 10%.
2.2 The Supreme Court Ruling
In a ruling issued on February 20, 2026, the Court held that the President’s use of IEEPA to impose tariffs exceeded the statute’s authorised scope. The majority opinion drew on the major questions doctrine, requiring clear congressional authorisation before an executive agency or officer may claim authority over matters of vast economic and political significance. The Court found no such authorisation in the IEEPA text for the imposition of comprehensive tariff schedules.
Critically, the ruling did not impugn the President’s tariff authority under alternative statutory frameworks, including Section 232 of the Trade Expansion Act of 1962 (national security), Section 301 of the Trade Act of 1974 (unfair trade practices), and the Reciprocal Trade Agreements Act. This legal reservation substantially limited the practical significance of the ruling.
2.3 Executive Response: The 15% Replacement Tariff
Within hours of the ruling, President Trump announced a 10% universal tariff under alternative statutory authority, subsequently elevated to 15% — the maximum permissible under the applicable statute — the following day. The administration simultaneously signalled that countries previously subject to higher IEEPA rates would now be treated identically to lower-rate jurisdictions, producing a de facto harmonisation of the tariff schedule at the 15% level.
This rapid executive response was widely interpreted by market participants as confirmation that the Court’s ruling would not materially diminish the administration’s protectionist posture. As Brian Levitt, Chief Global Market Strategist at Invesco, observed, ‘Other statutes grant the President broad authority to impose tariffs, meaning those previously enacted could simply be reimposed under different legal frameworks.’ - Differential Market Reactions Across Asian Financial Centres
3.1 Overview
Trading on February 23, 2026 provided a natural experiment in the heterogeneous effects of the tariff regime change across Asian markets. The variation in market performance is most readily explained by reference to each jurisdiction’s position under the old versus new tariff schedule — specifically, whether the transition to a flat 15% levy represented an improvement, a deterioration, or a status quo relative to that country’s previous tariff exposure.
Market / Index Change (%) Prior IEEPA Rate New Rate (15%) Net Tariff Effect
Hong Kong Hang Seng +2.3% ~34% (China) 15% Strongly positive — large rate reduction
South Korea KOSPI +0.6% ~25% 15% Positive — moderate rate reduction
India Nifty 50 +0.8% ~26% 15% Positive — moderate rate reduction
Malaysia KLCI +0.3% ~24% 15% Positive — moderate rate reduction
Singapore STI +0.3% 10% 15% Marginally negative — rate increase
Australia ASX 200 -0.7% 10% 15% Negative — rate increase and uncertainty
Table 1: Asian Market Performance on February 23, 2026 and Tariff Regime Comparison
3.2 High-Beta Beneficiaries: Hong Kong and Greater China Equities
The most pronounced positive reaction was recorded in Hong Kong’s Hang Seng Index, which rallied 2.3% on the day. This response is analytically coherent: Chinese goods had been subject to some of the highest IEEPA tariff rates, and the transition to a uniform 15% floor represented a substantial implied reduction in the effective tariff burden on Chinese exports. The rally was amplified by the relative undervaluation of Chinese technology equities following extended regulatory headwinds, creating conditions for a sharp mean-reversion trade.
It should be noted that the markets of mainland China and Japan were closed for public holidays, limiting the geographic breadth of observable market reactions on this date. The absence of Shanghai and Tokyo data represents a significant lacuna in the cross-market comparison.
3.3 Moderate Gainers: Korea, India, and Malaysia
South Korea, India, and Malaysia all recorded modest positive returns, consistent with their status as higher-tariff jurisdictions under the previous IEEPA schedule. The gains were attenuated relative to Hong Kong, reflecting both smaller absolute tariff reductions and lingering uncertainty regarding implementation timelines, potential country-specific exemptions, and the durability of the replacement tariff framework. The convergence of these markets around the +0.3% to +0.8% range suggests a market consensus that the ruling provided only modest and conditional relief.
3.4 Underperformers: Singapore and Australia
The divergent outcomes for Singapore and Australia — both previously assessed at the 10% IEEPA baseline — are structurally instructive. Australia’s ASX 200 declined 0.7%, with market commentary explicitly attributing the fall to heightened uncertainty rather than the tariff change per se. Singapore’s STI recorded a nominal gain of 0.3% despite facing an implied tariff increase under the new 15% floor, a result that requires careful disaggregation.
The STI’s positive print is likely attributable to portfolio rebalancing effects and regional beta uplift from the broader Asian market rally, rather than any fundamental positive re-rating of Singapore’s trade position. The index’s muted performance relative to regional peers, combined with Deputy Prime Minister Gan Kim Yong’s contemporaneous acknowledgement that Singapore faces an effective tariff increase, supports this interpretation.
- Singapore: Structural Vulnerability and Policy Response
4.1 Singapore’s Anomalous Tariff Position
Singapore occupies an analytically unusual position in the context of the new tariff regime. As a jurisdiction with a bilateral trade surplus with the United States in goods — driven substantially by pharmaceutical exports, electronics, and integrated circuits — Singapore had been assessed at the 10% baseline IEEPA rate, one of the lowest in the schedule. The transition to a universal 15% minimum therefore represents an absolute deterioration in Singapore’s tariff position, even as it simultaneously represents a relative improvement for most other Asian markets.
This asymmetry creates a political economy challenge of some subtlety. Singapore cannot easily leverage the prospect of tariff relief in bilateral negotiations, since the new regime offers no upside relative to the previous one. Deputy Prime Minister Gan Kim Yong explicitly acknowledged this constraint on February 22, noting that ‘if the 15 per cent minimum tariff is applied across the board, it would be very difficult for Singapore to negotiate for exemptions.’
4.2 Macroeconomic Exposure
Singapore’s extreme trade openness — with total trade approximating 300-400% of GDP — renders it structurally more sensitive to changes in the global trade regime than most comparable economies. Key channels of transmission include direct export competitiveness for goods destined for the US market, re-export and transshipment volumes through Singapore’s port infrastructure, supply chain disruptions affecting Singapore-based regional headquarters and manufacturing operations, and financial market contagion through Singapore’s role as the primary capital markets hub for Southeast Asia.
The pharmaceutical and electronics sectors are of particular concern. Singapore is among the world’s largest exporters of pharmaceuticals by value, and a sustained 15% levy on these exports would represent a meaningful cost imposition for US importers, with likely downstream effects on contract volumes and long-run investment decisions by multinational corporations operating Singapore facilities.
4.3 The Uncertainty Premium
Perhaps more damaging than the tariff rate itself is the structural uncertainty now embedded in the trade policy environment. Analysts polled in the immediate aftermath of the ruling were unable to specify the implementation timeline, the scope of potential exemptions, the treatment of services exports, or the legal durability of the replacement tariff framework. This epistemic ambiguity generates elevated risk premia for Singapore-domiciled investment decisions, potentially deferring capital expenditure and foreign direct investment.
Claudio Galimberti, Chief Economist at Rystad Energy, characterised the situation with precision: ‘The current result of the Supreme Court’s ruling is not a reversal of protectionism, but a narrower, more legally constrained US tariff regime.’ For Singapore, the narrowing of the legal constraint provides little practical comfort if the economic outcomes remain unchanged or worsen.
4.4 Government Response and Diplomatic Strategy
The Singapore Government’s response has been calibrated to balance diplomatic sensitivity with domestic economic reassurance. Deputy Prime Minister Gan Kim Yong’s announcement on February 22 that Singapore would ‘engage its US counterparts to seek clarity on the implementation of the potential new 15 per cent tariff’ represents a prudent first-order response, prioritising information acquisition before committing to a negotiating position.
The government’s acknowledged difficulty in securing exemptions under a universal tariff regime does, however, raise questions about the longer-term strategic options available to Singapore. These might include accelerated diversification of export markets, enhanced investment in sectors with lower US tariff exposure, and deepened engagement with multilateral trade frameworks to build diplomatic coalitions around trade rule compliance. - Analytical Framework: Judicial Constraint and Executive Trade Power
5.1 The Limits of Judicial Relief for Markets
The market reaction to the Supreme Court ruling illustrates a fundamental tension between legal and economic frameworks for analysing trade policy. From a constitutional law perspective, the ruling is significant: it represents the first successful judicial limitation of the executive’s claimed IEEPA tariff authority and establishes a precedent that may constrain future administrations. From a market perspective, however, the ruling’s significance is substantially diminished by the availability of alternative legal pathways to the same economic outcome.
Financial markets are ultimately indifferent to the statutory basis for tariffs; they respond to the economic effect of trade barriers on corporate earnings, supply chains, and growth prospects. The administration’s rapid and successful deployment of substitute authority demonstrated that the Court’s ruling would not, at least in the near term, reduce the aggregate tariff burden on US imports. This explains why, as Janus Henderson’s Daniel Siluk characterised the ruling, it was ‘mildly supportive for global risk sentiment’ rather than transformatively so.
5.2 The Procedural Constraint Hypothesis
A more optimistic reading of the ruling focuses on its procedural implications rather than its immediate economic effects. By requiring trade policy to proceed through congressionally authorised mechanisms, the Court has arguably restored a form of procedural constraint that may, over time, slow the velocity of tariff escalation and create greater predictability. Daniel Siluk’s characterisation of ‘a shift towards slower, more procedurally constrained trade policy’ captures this view.
The procedural constraint hypothesis has empirical traction if one accepts that congressional processes — including committee hearings, legislative timelines, and the need to build supermajority coalitions for certain trade measures — impose meaningful friction on executive unilateralism. Whether this friction translates into substantively lower tariff levels in the medium term remains an open empirical question.
5.3 Implication for Market Volatility
For investors, the relevant question is not whether tariff levels will decline, but whether the distribution of future tariff outcomes has become more predictable. A regime characterised by slower, statute-constrained tariff changes, even at permanently higher levels, may generate lower risk premia than one characterised by rapid, executive-driven escalation. This suggests that the ruling’s most significant market impact may be a reduction in implied volatility in trade-exposed sectors, even in the absence of a reduction in the tariff rate itself. - Implications and Outlook
6.1 Near-Term Market Dynamics
The near-term trajectory of Asian financial markets will depend primarily on three variables: the formal implementation of the 15% tariff schedule, the extent and distribution of any country or sector exemptions, and the pace of bilateral negotiations between the US and individual trading partners. Markets have, in the period immediately following the ruling, appeared to price in a moderate probability of meaningful exemptions — a pricing assumption that could be sharply revised upon publication of the final tariff schedule.
6.2 Singapore-Specific Considerations
For Singapore, the critical near-term focus is the clarification that the government is actively seeking from US counterparts. The market impact of uncertainty itself — independent of the ultimate tariff rate — should not be underestimated in a financial hub where investment decisions are made on the basis of regulatory predictability. A rapid resolution of implementation ambiguity, even one that confirms the 15% rate, would likely be received more favourably by markets than a prolonged period of opacity.
The medium-term outlook for Singapore’s equity market will be shaped by three considerations: the degree to which pharmaceutical and electronics exporters can absorb or pass through the cost of higher tariffs, the extent to which Singapore’s role as a regional logistics and financial hub insulates it from direct goods-tariff exposure, and the success of the government’s diplomatic effort to secure either exemptions or a renegotiated bilateral framework.
6.3 Systemic Implications for the Rules-Based Trading Order
The episode raises broader questions about the durability of the rules-based international trading order centred on the World Trade Organisation framework. The administration’s rapid substitution of one statutory basis for tariffs with another — sidestepping the WTO’s dispute resolution mechanisms and exploiting national security carve-outs in ways that strain the intent of those provisions — suggests that the post-war trade governance architecture is subject to increasing stress. For small, trade-dependent economies like Singapore, this represents a structural challenge that no amount of bilateral diplomacy can fully mitigate. - Conclusion
The Supreme Court’s February 20, 2026 ruling on the IEEPA tariff authority and the subsequent announcement of a 15% replacement tariff constitute a revealing natural experiment in the relationship between legal constraints, executive trade policy, and financial market reactions. The heterogeneous market responses across Asian financial centres — most pronounced in jurisdictions that faced the largest implied tariff reductions under the new flat rate — confirm that markets are primarily calibrating to the economic effect of tariff changes rather than to the constitutional significance of the court ruling.
Singapore’s situation is structurally distinct and strategically complex. As a small, highly open economy that occupied a low-tariff position under the previous regime, Singapore derives limited benefit from the transition to a universal 15% floor and faces both a direct tariff increase and a prolonged period of policy uncertainty. The government’s measured diplomatic response reflects a clear-eyed assessment of the limited leverage available in a universal tariff environment.
The broader lesson for markets and policymakers is that judicial constraints on executive trade authority, while constitutionally significant, are likely to produce only modest and temporary economic relief when the executive retains access to alternative statutory instruments. Durable reduction in trade policy uncertainty will require either a fundamental change in the administration’s policy orientation or the construction of robust multilateral frameworks capable of constraining unilateral trade escalation — neither of which appears imminent as of the date of this case study.
References and Sources
Tan, S. (2026, February 23). Singapore, Asia stocks rise amid uncertainty over Trump’s new 15% global tariffs. The Straits Times.
Levitt, B. (2026). Commentary on the US Supreme Court IEEPA ruling. Invesco Global Market Strategy.
Siluk, D. (2026). Market implications of the Supreme Court tariff ruling. Janus Henderson Investors, Global Short Duration and Liquidity.
Galimberti, C. (2026). Energy and trade policy analysis: Post-ruling tariff framework. Rystad Energy.
Gan, K. Y. (2026, February 22). Ministerial statement on Singapore’s response to new US tariff schedule. Singapore Government.
United States Supreme Court. (2026, February 20). Ruling on IEEPA tariff authority. Washington, D.C.: SCOTUS.
International Emergency Economic Powers Act of 1977, 50 U.S.C. §§ 1701–1708.
Trade Expansion Act of 1962, Section 232, 19 U.S.C. § 1862.