You know how some weeks on Wall Street just sort of hum along? This was shaping up to be one of those. Then Friday happened, and the news wires started buzzing like a beehive that just got poked.
First, the economic backdrop got a fresh coat of paint, and the picture wasn't pretty. The U.S. economy expanded at a mere 1.4% annualized pace in the fourth quarter. That's a sharp slowdown from the 4.4% clip in the prior quarter and well below the 3% growth economists were expecting. At the same time, the Federal Reserve's favorite inflation gauge, the PCE index, accelerated to a 3% annual rate in December. The monthly increase of 0.4% was the fastest pace since February. So, slower growth and hotter inflation—not exactly the combo platter the market orders.
President Donald Trump pointed a finger at the prolonged government shutdown, arguing it shaved at least two percentage points off the GDP number. But the real market-moving headline was still hours away.
The Supreme Court dropped a landmark decision, striking down the administration's authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA). The Court's reasoning was all about the separation of powers. "The Framers gave ‘Congress alone' the power to impose tariffs during peacetime," the Court wrote, adding that "the whole power of taxation rests with Congress." In short, the Court said the president can't use an emergency declaration as a backdoor to tax imports. The ruling did not address whether the administration must refund the more than $130 billion in tariffs already collected under those emergency declarations.
If you thought that would slow the tariff train, think again. Trump held a press conference and essentially said, "Nice try."
"The good news is that there are methods, practices, statutes and authorities… that are even stronger than the IEEPA tariffs available to me," Trump said. He then unveiled a new 10% global tariff, this time using Section 122 of the Trade Act of 1974. He confirmed that existing tariffs under Section 232 (national security) and Section 301 (unfair trade practices) remain "fully in place and in full force and effect."
"We have alternatives. Great alternatives. I can charge much more than I was charging," he added, suggesting the refund issue for past tariffs could be tied up in litigation for years.
This legal maneuvering comes as the core economic justification for the tariffs faces new scrutiny. A day before the Court's ruling, trade data showed the U.S. goods and services deficit widened to $70 billion in December. For the full year 2025, the trade gap reached $901 billion—essentially unchanged from 2024. This suggests that years of tariffs have done little to narrow the trade imbalance, which was a central goal of the administration's "America First" policy.
While Washington debated trade powers, another long-term economic shift was getting attention. Economists and policymakers are increasingly focused on artificial intelligence's growing impact on the labor market. Federal Reserve Governor Michael Barr recently flagged mounting challenges for younger workers in digital services. In an interview, Oxford Economics economist Nico Palesch warned that advances in robotics could soon disrupt physical jobs, potentially affecting up to 20% of the workforce.
