Why brokers should be paying attention to tariff ruling
The Supreme Court currently has two cases before it that could play a major role in the mortgage industry.
The first is the case of Lisa Cook, the Federal Reserve governor whom President Donald Trump wanted to fire for alleged mortgage fraud.
Reports indicate the justices may be siding with Cook to keep Fed independence intact. No word yet on when a decision will be handed down in that case, although it could be March or April.
The second case seems less directly tied to the mortgage market but could have a bigger impact. It is the case of the tariffs that the Trump administration has been using over the last year. The Supreme Court will decide on the legality of those tariffs.
One legal expert has thoughts on what may happen in the case, while a market expert discusses the impact on mortgage rates.
Kenneth Katkin (pictured top), law professor at Northern Kentucky University’s Chase College of Law, believes that the administration should lose the case, but isn’t sure that’s what the court is going to rule.
“It's very hard to predict what the Supreme Court is going to do,” Katkin told Mortgage Professional America. “I certainly think on the merits, the administration should lose. But the Supreme Court has been ruling in favor of Trump in a lot of cases, including a lot of cases that I think they should be ruling against them.”
Shifting of powers
While it is unclear when the Supreme Court will issue a ruling on the tariffs, Katkin said recent moves by the court to shift powers traditionally held by Congress to the president seem to set this decision up to be another step in that direction.
“I think that if you apply the law as it was understood until last year, there's really no serious doubt that the tariffs are illegal,” Katkin said. “But the Supreme Court has been making a lot of changes over the past year in the way they view the relationship between the executive branch and Congress, and they've really been shifting power from Congress to the executive branch.
“This court, in terms of its habits of mind or its judicial philosophy, likes a really strong presidency. So it might be thinking about changing the law in Trump's favor, but I certainly think, as a matter of existing law, the statutory framework that Trump is trying to rely on does not support the tariff.”
Katkin said Trump has been using a statute, in combination with declaring emergencies, to issue tariffs worldwide.
“A lot of the attention that he's been getting is because of his reliance on a statute called the International Emergency Economic Powers Act,” he said. “His reading is pretty implausible, but that's a statute that says if there's an international emergency or crisis that comes up very suddenly, then the President can take economic sanctions against other countries. I think that's a very implausible reading of that statute, and the court really should strike that down.
“There are other statutes out there that actually deal more directly with trade disputes and with the president's power to use tariffs in response to particular trade disputes. I think those would be a stronger basis for supporting some tariffs, but only when there is a bona fide trade dispute.”
By using the statute he did, Katkin said it would allow a greater expansion of power than other statutes would have.
“I think he wanted to rely on the International Emergency Economic Powers Act because he was basically taking the position that anything that he says is an emergency is an emergency,” he said. “I think he was thinking that that would give him more power. But I do think that there's overreach there.”
Impact on mortgage rates
If the tariffs are ruled legal, things will likely continue as they have over the last year. However, if the court rules them illegal and forces the government to repay them, that could have ripple effects on mortgage rates, according to one analyst.
Eric Hagen is the managing director and mortgage and specialty finance analyst at BTIG. He said that if the government had to repay tariffs, it would have to borrow more money to make up for the shortfall.
“We are just waiting for the SCOTUS decision about whether the tariffs are legal or not,” Hagen told Mortgage Professional America. “But if they aren’t legal, there'd be a hole in the budget. We'd have to borrow more, and presumably, Treasury rates would go up in response to that. That’s one reason why we could see Treasuries going up over the next year.”
Hagen said that a bump in rates could wipe out some of the mortgage rate declines we saw early in 2026 when Trump ordered the GSEs to buy mortgage bonds, sending rates into the high 5s.
“Absolutely, look at that as a potential risk,” Hagen said. “There are so many things that contribute to the potential for higher interest rates. That is a very relevant and near-term one for sure.”
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