Consumers likely won't see cheaper prices at the grocery store or shopping mall, economists say, despite the Supreme Court striking down many of President Trump's tariffs.
There are a couple reasons why: For one, the president has many tools to impose tariffs and the court decision last week only deemed one of them unconstitutional.
Within hours of the ruling, Trump said he was using a different law to reimpose taxes on global imports.
"The administration's made it very clear that they are not turning away from tariffs," says Mary Lovely, a senior fellow at the Peterson Institute for International Economics.
The second reason is a little more complex, a concept known as "price stickiness."
Here's what to know about why shoppers won't see price reductions anytime soon.
Presidential tariff tools
"The legal tool to implement it, that might change, but the policy hasn't changed," U.S. Trade Representative Jamieson Greer told ABC over the weekend.
The Supreme Court struck down Trump's authority to impose tariffs under the 1977 International Emergency Economic Powers Act (IEEPA), which no president had used to implement tariffs before. But, it's worth noting that these tariffs only accounted for about half of all the import taxes the government had been collecting.
Now that imposing tariffs under the law has been outlawed, the administration has quickly moved ahead with alternatives, even though they don't offer the sweeping power that Trump claimed to have under the IEEPA.
By Saturday, Trump said he was using Section 122 of the Trade Act of 1974 to implement worldwide tariffs of 15%, after initially saying he would impose them at 10%. He claimed in a social media post that this tariff level was "fully allowed, and legally tested."
"For a consumer, it doesn't really matter what authority that the president calls on to impose the tariff," says Carola Binder, an economics professor at the The University of Texas at Austin School of Civic Leadership. "Some particular tariffs might go down. And so that would mean that prices of particular goods could go down, but the overall level would remain pretty high."
Goldman Sachs analysts seem to agree.
"We estimate that the further impact on consumer prices will be minor from here," the analysts wrote over the weekend, noting that the "bulk" of companies passing on extra tariff costs to consumers has already occurred.
Similarly, analysis from the Peterson Institute said tariff rates "are set to be similar overall to their level prior to the court ruling, so consumers will continue to feel this tax increase. Prices will likely be higher at the store because the longer tariffs last, in whatever form, the more their costs are passed through to consumers."
Tariffs under Section 122 technically have a 150-day limit. But, Binder says, "after 150 days, if Congress doesn't extend the tariffs, it seems that the president could just let the first set of tariffs expire and then declare a new set again." Lawsuits over this are likely and this could end up at the Supreme Court again.
Section 301 of the Trade Act of 1974 allows tariffs in response to "unfair trade practices" of foreign countries, while Section 232 of the Trade Expansion Act of 1962 allows tariffs on certain national security grounds. (Section 301 tariffs on China have been in place since Trump's first term.)
There's also Section 338 of the Tariff Act of 1930, a never-used authority to use tariffs to retaliate against foreign discrimination against American goods.
Imposing tariffs under these laws all have stipulations and limitations attached and the administration's rationale could be challenged in court.
Still, "we're not going to see tariff relief in the longer run, and businesses know that," Lovely of the Peterson Institute says.
Stuck prices
Another reason customers are unlikely to see substantial price changes at the store is that in general, prices take time to adjust. It's a concept of "sticky prices."
It happens when "prices change more slowly than the underlying fundamental factors that go into pricing," Lovely says. A common example involves restaurants: if the price of one ingredient goes up, the restaurant might want to wait a bit before printing new menus that show a higher price for the dish, just in case the cost of ingredients changes again.
Prices can be sticky in either the high or low direction. But in this case, tariffs have led to higher prices for consumers, and they could stay that way.
The companies that have raised prices in response to tariffs are finding out whether consumers were willing to pay more for stuff all along. The tariffs have essentially been "a broad set of experiments, which will reveal to suppliers if their previous prices were profit maximizing or too low," marketing professor emeritus at Harvard Business School Robert Dolan told NPR last year. Suppliers may keep prices high if people keep paying, tariffs or not.
Also, many businesses, especially medium-size businesses, are still catching up to tariffs and adjusting how much of the cost they are passing on to customers, Lovely says. Some had stockpiled inventory ahead of tariffs.
"They haven't been able to pass it through completely yet, waiting to see what would happen," she says. "So they're going to be highly reluctant to roll back when they're still in the process of catching up."
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