Recalibrate Now: Business Valuation After the SCOTUS Tariff Ruling

Supreme Court of The United States of America

On February 20, 2026, the United States Supreme Court issued one of the most consequential economic rulings in recent memory. In a 6-3 decision in Learning Resources, Inc. v. Trump, the Court held that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs. The sweeping global tariffs that had reshaped U.S. trade policy — including a 10% baseline tariff and reciprocal tariffs ranging up to 41% on many trading partners — were struck down as legally unauthorized.

For business valuators, this ruling is not merely a headline. It is a material valuation event. Every engagement that touches a business with exposure to import costs, supply chain dependencies, pricing power, or trade-sensitive earnings must now be revisited with fresh eyes. Here is what you need to reconsider immediately.

The Macro Backdrop Has Shifted

The IEEPA tariffs had driven the U.S. weighted average effective tariff rate to approximately 16.9% — the highest since 1943. The Supreme Court's ruling, if implemented, could reduce that rate to approximately 9.1%. That is a seismic shift in the cost environment that underpins virtually every valuation model built over the past 12–18 months.

The tariffs had been reducing U.S. GDP by an estimated 0.5% annually and adding approximately $1,400 per year to average household costs. These macro headwinds directly suppressed consumer demand forecasts, elevated cost-of-goods assumptions, and distorted normalized earnings across many industries. With the legal basis for those tariffs now invalidated, valuators must reassess whether their baseline economic assumptions remain defensible.

However, the picture is not simply a clean reversal. President Trump has responded defiantly, announcing plans to reinstate equivalent tariffs under alternative legal frameworks — including Section 122 of the Trade Act of 1974 (a 15% global tariff), Section 232 (national security tariffs), and Section 301 (unfair trade practices). The battle over tariffs is far from over, and residual policy uncertainty remains a material valuation input.

Normalized Earnings Require Restatement

One of the most immediate tasks for every valuator is revisiting normalized earnings. Under the income approach — whether using Discounted Cash Flow (DCF) or capitalization of earnings — the normalization of historical financials is foundational. During the tariff period, many businesses experienced:

• Artificially elevated cost of goods sold (COGS) due to import duties passed along supply chains

• Compressed gross margins in import-dependent sectors such as retail, electronics, footwear, and automotive

• Inflated revenue in some domestic manufacturers that benefited from tariff-driven import substitution

• Suppressed discretionary earnings in small and mid-size businesses, which bore more than 90% of tariff cost pass-through

Valuators must determine whether historical periods (2024–2025) reflect a normalized or an aberrational operating environment. Any earnings base derived from tariff-distorted financials needs adjusting, or at minimum, a clear narrative in the valuation report explaining the context and its impact on maintainable earnings.

WACC Calculation

WACC and Discount Rates: Time to Recalibrate

The weighted average cost of capital (WACC) and build-up discount rates used in income approach valuations are directly influenced by macroeconomic risk factors. The tariff environment elevated several components of risk that are now subject to reassessment:

• Company-specific risk premiums that were adjusted upward for supply chain exposure and input cost volatility may now require downward adjustment for import-dependent businesses

• Industry risk premiums for sectors like consumer goods, manufacturing, and retail should be revisited in light of the structural cost improvement that could follow tariff rollback

• Equity risk premiums at the macro level were influenced by the tariff-induced economic drag; a projected 2.4% increase in S&P 500 earnings before interest and taxes signals reduced systemic risk for 2026

• Country risk premiums for valuations of businesses with significant exposure to Canada, Mexico, and other trading partners affected by IEEPA tariffs deserve fresh scrutiny, particularly for North American integrated supply chains

That said, the continued threat of tariff reimposition under alternative legal authorities means that valuators should not eliminate risk premiums associated with trade policy uncertainty. Instead, those premiums should be calibrated to reflect residual legislative and executive risk, not the peak tariff environment of 2025.

The Refund Question: A New Asset on the Balance Sheet?

Over $175 billion in tariff revenue collected since early 2025 is now potentially subject to refund, according to Penn-Wharton Budget Model estimates. More than 300,000 importers of record made over 34 million import entries under the IEEPA-based tariffs. Many have already filed or are preparing refund claims with U.S. Customs and Border Protection.

For valuators, this creates an important question: should potential tariff refunds be treated as a contingent asset in a business valuation?

The answer depends on the facts and circumstances, but here are key considerations:

• If a subject company has documented overpayment of IEEPA tariffs and has filed or is eligible to file a refund claim, the present value of probable refunds may constitute an excess asset or non-operating asset that should be added to the going-concern value

• The probability-weighted recovery must account for refund process complexity, legal timeline, and the government's likely contested response — the process will be lengthy and administratively complex, particularly for smaller businesses

• Valuators working on acquisition or transaction engagements should flag this contingent asset as part of the deal structure, as buyers and sellers may disagree materially on its value and recoverability

Winners and Losers: Industry-Specific Valuation Adjustments

The ruling does not affect all industries equally. Valuators must apply sector-specific judgment when reassessing the impact:

Sector	Valuation Impact
Retail, footwear, apparel	Positive — lower import costs improve margins; normalization adjustments likely needed
Automotive	Positive — major beneficiary of IEEPA rollback; integrated North American supply chain relief
Consumer electronics	Positive — reduced COGS from lower import duties
Domestic steel & aluminum	Negative — Section 232 tariffs remain, but competitive pressure from cheaper imports may return
Small & mid-size importers	Positive — greatest proportional beneficiaries of margin recovery
Domestic manufacturers relying on tariff protection	Mixed — exposed to increased foreign competition without IEEPA shield
Businesses with China exposure	Neutral to negative — Section 301 China tariffs remain fully intact

These distinctions must flow directly into how a valuator selects and adjusts comparable public company multiples under the market approach, and how forward earnings projections are structured under the income approach.

Market Multiples and Guideline Companies Need a Fresh Look

Under the market approach, guideline public company multiples and guideline transaction multiples were depressed or elevated during the peak tariff environment of 2025. EBITDA multiples in tariff-sensitive industries reflected the cost burdens and margin compressions of that period. Using those comparables without adjustment in a post-ruling valuation could systematically undervalue or overvalue the subject company.

Valuators should:

1. Re-examine the transaction date context of any guideline transactions from 2025, noting whether the deal pricing reflected tariff-era distortions

2. Apply upward adjustments to market multiples in sectors poised to benefit from tariff relief, supported by narrative and quantitative justification

3. Monitor public company re-ratings — financial markets have already begun pricing in tariff relief, with equity prices in retail and import-sensitive sectors moving on the ruling

4. Document the uncertainty explicitly — given that tariff reimposition under Section 122, Section 232, or Section 301 remains a live possibility, any market-based adjustments should be transparently disclosed and explained

Trade Flows and Financial Impact

Ongoing Uncertainty Is Itself a Valuation Input

Perhaps the most nuanced aspect of this ruling for valuators is that the uncertainty did not end with the decision. President Trump raised the Section 122 global tariff baseline from 10% to 15% within days of the ruling, and alternative tariff frameworks are actively being assembled. The CFR notes that Congress must ratify Section 122 tariffs within 150 days or they expire — a political clock that adds yet another layer of policy volatility.

For valuators, this ongoing uncertainty has several implications:

• Scenario analysis in DCF models should include a base case, a tariff-relief case, and a tariff-reimposition case, each weighted by probability

• Sensitivity tables on key value drivers — revenue growth, gross margin, and WACC — should reflect the plausible range of tariff outcomes

• Valuation date specificity is more important than ever; a valuation as of February 20, 2026 carries materially different assumptions than one dated January 1, 2026

• Report disclosures should clearly articulate reliance on post-ruling assumptions and acknowledge that the trade policy landscape remains subject to executive, legislative, and judicial developments

A Call to Action for Valuators

The Supreme Court's IEEPA ruling is a watershed event in U.S. trade policy — but its translation into business value is neither automatic nor uniform. As business valuators, our professional responsibility is to translate macro events into defensible, well-reasoned, and well-documented value conclusions.

Every engagement in your current or near-term pipeline that involves an import-sensitive, supply-chain-dependent, or consumer-facing business deserves a second look. The assumptions that grounded your valuation work in 2025 may no longer hold. Update your models. Revisit your discount rates. Reassess your normalized earnings. And above all, document your reasoning transparently.

The ruling has changed the landscape. It is our job to map it accurately.

Achille Ekeu, MBA, CVA, is the Founder, President, and CEO of The Washington Valuation Group, LLC, based in Leesburg, Virginia. He provides business valuation services for a wide range of purposes, including M&A, SBA lending, estate and gift tax, litigation support, and shareholder disputes. He is a Certified Valuation Analyst (CVA) credentialed by the National Association of Certified Valuators and Analysts (NACVA).