The Supreme Court of the United States this morning ruled against Donald Trump’s use of the International Emergency Economic Powers Act to impose tariffs, but declined to rule on firm’s eligibility for refunds, meaning that importers will be left to pursue claims through the Court of International Trade.

At first glance, the ruling should reduce tail risks for market participants. The threat of abrupt and unilateral changes in US tariff rates has been a persistent source of volatility premia in foreign exchange, particularly for export-sensitive currencies. By narrowing the scope for executive action and lengthening the policy transmission lag, the Court’s rebuke should reduce uncertainty for corporates and investors, driving a modest compression in expected currency volatility and supporting a “risk-on” tilt, benefitting cyclical units such as the Mexican peso, Canadian dollar and many of their Asian peers.

This appears to be playing out now—most major currencies are rising against the dollar—and could accelerate over time, particularly if linked with a firming in global growth expectations and improved risk appetite.

However, the impact on the dollar should be broadly positive in the longer term. While a reduction in trade uncertainty might trim some of the safe-haven demand embedded in the greenback, import taxes have also functioned as a drag on the American economy—raising input prices, crimping corporate margins, lifting uncertainty, dampening domestic demand and, at the margin, narrowing expected growth differentials between the US and its global rivals. Refunds—which could run into the hundreds of billions of dollars—might boost growth momentum, and add to the hawkish repricing in US rates already underway.

Further, the administration has already disclosed plans to replace many of the IEEPA levies with similar taxes under other legal authorities. After a period of renewed front-running among businesses, corporate margins, trade volumes, and consumer prices could suffer further damage.

And there are second-order effects to consider. If the administration chooses to double down on its use of alternative tools—such as targeted trade remedies, subsidies, negotiated agreements, or even military threats—implied volatility could climb even further, leaving currencies adjusting to more violent shifts in relative growth and capital flow expectations.