The Court Ruled.
The War Continues.

IEEPA (International Emergency Economic Powers Act) is a 1977 law that gives the president sweeping authority to respond to national emergencies — but the Supreme Court ruled this week it was never intended to include the power to levy tariffs. That word — "tariffs" — simply doesn't appear in the statute.

Section 122 of the Trade Act of 1974 explicitly allows tariff imposition, but with guardrails Congress built in deliberately. It caps tariffs at 15%, requires the president to declare a "large and serious balance-of-payments deficit," and most importantly, sets a hard 150-day expiration unless Congress votes to extend it. Trump signed a 10% tariff under Section 122 Friday night, then raised it to 15% on Saturday.

The practical difference: IEEPA let Trump treat tariffs like a fast, flexible dial — turning them up, down, or off for individual countries within days. Section 122 is a blunter instrument with a sunset built in and no ability to target individual countries differently. It applies uniformly. The administration has 150 days — roughly until late July — to complete investigations under Section 232 and 301 that could replace this structure with more permanent tariffs.

PCE stands for Personal Consumption Expenditures — a measure of what Americans actually spend money on, priced month-by-month. The Fed uses it as its official inflation benchmark, with a 2% annual target for "core" PCE (which strips out food and energy, since those prices swing around too much to be useful for long-term policy).

The reason the Fed prefers PCE over CPI (Consumer Price Index) comes down to composition. PCE adjusts for substitution — if beef gets expensive and people buy more chicken, PCE captures that shift. CPI uses a fixed basket that doesn't adjust. PCE also includes spending on behalf of consumers (like employer-provided healthcare), which makes it a broader picture of actual consumption.

This week's December PCE came in at 0.4% month-over-month. Annualized, that's roughly 4.8% — more than double the Fed's target. That's the problem. Even the "core" reading was 0.4%, suggesting this wasn't just an energy spike. Persistently hot PCE is the clearest signal of why the Fed is on hold.

The Strait of Hormuz is a narrow waterway — at its narrowest point, just 21 miles wide — between Iran and Oman. It connects the Persian Gulf, where most Middle Eastern oil is extracted, to the Gulf of Oman and the open sea.

Roughly 20 million barrels of oil per day pass through it — about 20% of global petroleum trade. There is no practical alternative route for most of that volume. Saudi Arabia, Iraq, the UAE, Kuwait, and Bahrain all export oil primarily through this chokepoint.

Iran has historically threatened to "close" the Strait during periods of tension, and while closing it entirely is operationally difficult, even disrupting traffic there would spike global oil prices almost immediately. The mere threat — which we're seeing now — is enough to add a "geopolitical risk premium" to crude prices, which is why oil climbed above $66 this week before any military action occurred.

Nvidia makes the GPUs that power the AI buildout. When Microsoft, Meta, Google, and Amazon spend hundreds of billions on AI infrastructure, most of that money flows through Nvidia's data center chips. That makes Nvidia's quarterly results one of the cleanest windows into whether the AI spending wave is accelerating, steady, or showing cracks.

The stakes this Wednesday: consensus expects $65.6 billion in revenue — a 65% year-over-year increase — and $1.52 in earnings per share. Nvidia has beaten expectations twelve consecutive quarters. Missing, or guiding down, would raise questions the market is already nervous about: Is AI infrastructure spending peaking? Are the hyperscalers pulling back capex? Are cheaper models from DeepSeek reducing GPU demand?

Beyond Nvidia itself, Salesforce also reports Wednesday. Software has been the most beaten-down sector in 2026 precisely because investors worry AI is replacing software workflows rather than just adding to them. A strong Salesforce report with AI-driven revenue growth would signal software can adapt. A weak one deepens the narrative that the disruption is real.

A balance-of-payments deficit occurs when a country spends more on foreign goods, services, and investments than it earns from them — essentially, more dollars flowing out than flowing in. The U.S. trade deficit totaled $901 billion in 2025.

Section 122 was written specifically to let a president address "large and serious" balance-of-payments deficits by imposing temporary tariffs. The Trump administration's position is that the U.S. trade deficit qualifies. The law allows up to 15% tariffs for 150 days without the extensive investigations required by Section 232 or 301.

The catch: Section 122 says tariffs must be applied uniformly — no targeting China differently from Germany. And the 150-day clock starts ticking immediately, with no provision for a president to simply restart it after expiration without congressional approval. That's why this is a bridge, not a solution.