The waiting game might finally be over. The U.S. Supreme Court could rule on President Donald Trump's tariff authority as early as Friday morning, and the stakes are enormous for investors trying to figure out where markets are headed in 2026.

What's Happening Friday

The Supreme Court returns from break for an Opinion Day on Friday, meaning we could get a decision as early as 10 a.m. ET. Of course, the justices might punt this one down the road a bit longer, but the fact that the court's 6-3 conservative majority expedited this case suggests they want to resolve it sooner rather than letting it drag into summer.

At the heart of the case is whether Trump can legally use the International Emergency Economic Powers Act (IEEPA) to slap tariffs on trading partners. Since taking office in January 2025, Trump has relied on this 1977 law to justify his tariff policies, which have dominated financial market discussions for the past year.

The problem? The IEEPA was designed to address national security threats, not to collect tariffs from existing trading partners. In fact, no president has ever used this law to impose tariffs before Trump.

The Legal Arguments

Critics of Trump's tariff approach argue that using the IEEPA this way represents a massive executive overreach, essentially grabbing power that the Constitution explicitly grants to Congress. Remember, Congress has the constitutional authority to tax and regulate tariffs, not the president.

The Peterson Institute for International Economics pointed to an intriguing parallel: the Supreme Court's recent 6-3 ruling against deploying troops in Chicago. That decision cited intrusion of powers, authority beyond the text of the law, and bypassing existing authority. Sound familiar? The Institute sees similar issues with the tariff case, suggesting the court might rule against Trump based on that precedent.

But here's where it gets complicated. The Supreme Court could issue a clean yes-or-no decision, or they could split the baby with a partial ruling that leaves some tariffs standing while limiting Trump's future authority. They also have to grapple with a messy practical question: if they rule against Trump, how do tariffs already collected get returned? Countries, companies, and consumers have all paid up, and consumers have absorbed higher costs throughout the supply chain.

The Prediction Market Verdict

If you want to know what smart money thinks will happen, check out the prediction markets. Millions of dollars are riding on contracts at Kalshi and Polymarket.

Right now, Kalshi shows just a 28% chance the Supreme Court rules in Trump's favor, implying a 72% probability they overturn the tariffs. That's a dramatic shift from November when Trump's odds stood at 48%, or even the end of 2025 when they were at 36%. Polymarket tells a similar story, with only 32% odds favoring Trump.

Another fascinating Kalshi market asks how many of the nine justices will vote to uphold the tariffs. The most popular bet is three justices (42% probability), followed by five (18%) and four (16%). There's a 10% chance that zero justices vote for tariffs, and less than 1% chance all nine side with Trump.

Don't Assume Tariffs Disappear

Even if the Supreme Court rules against the administration, don't assume tariffs are dead. Treasury Secretary Scott Bessent has already floated potential workarounds, according to reports. The administration could potentially invoke the Trade Act of 1974 or the Trade Expansion Act of 1962 to impose tariffs through different legal channels.

So this might not be the end of the tariff story, just a new chapter.

Which Stocks and Sectors Matter Most

Jay Woods, Chief Market Strategist at Freedom Capital Markets, told MarketDash that tariffs are the big story he's watching for 2026.

"I think we have a lot of bigger issues to look forward to as we start the new year including the Supreme Court decision," Woods said. He believes the first half of 2026 could represent the market's peak, with the tariff ruling as a major factor.

"The Supreme Court decision is the one thing I'm focused on. I was hoping we would get that out of the way before we started 2026. We didn't."

A ruling to repeal the tariffs would create immediate uncertainties about refunds, consumer impacts, and international compensation. Woods pointed to Costco Wholesale (COST) as a company potentially affected by the ruling, since they've already filed a lawsuit seeking reimbursement.

He also highlighted Nike Inc. (NKE), which has been "crushed due to tariffs."

"See if they get a rebound because now the tariffs were deemed illegal, and we are owed money," Woods said.

The Lawsuit Brigade

Costco and Nike aren't alone in challenging the tariffs. Subsidiaries of Toyota Motor (TM), Revlon, Del Monte Fresh Produce, and others have filed lawsuits, according to reporting from The Hill.

An October Reuters report identified construction and industrial sectors as among the hardest hit by tariffs, with Toyota and 3M Company (MMM) specifically named as impacted companies.

Nike and other footwear and apparel companies that rely heavily on Asian imports could emerge as big winners if the court strikes down the tariffs. Really, any company that imports goods from countries facing steep tariffs could see dramatic moves depending on how this plays out.

Constellation Brands (STZ) and Deere & Co (DE) are among the companies that have publicly discussed the financial toll of tariffs with their investors.

Brace for Volatility

Whatever the Supreme Court decides on Friday, expect dramatic price swings. Individual stocks could jump or crater based on their tariff exposure. Sector-specific and country-specific ETFs will likely see intense volatility as traders digest the implications.

The uncertainty around refunds, legal precedent, and potential workarounds means this ruling could send shockwaves through markets regardless of which way it goes. Keep your eyes on Friday morning at 10 a.m. ET.