A pair of opposing trade shocks hit the U.S. economy in early 2026, and their combined effect leaves the country facing higher inflation risk, according to new research from the Federal Reserve Bank of Dallas. The Supreme Court’s February ruling striking down a portion of tariffs imposed under the International Emergency Economic Powers Act lowered average U.S. import tariffs by roughly 4.8 percentage points. But weeks later, Iran’s closure of the Strait of Hormuz disrupted shipping flows and increased global transportation costs — completely undoing the disinflationary benefit of the tariff reduction.
The Dallas Fed’s analysis, using a model designed specifically to understand the effects of trade disruption on inflation dynamics, found that the increase in shipping costs from the Hormuz closure independently offsets the roughly 0.2 percentage-point reduction in core PCE inflation that the tariff ruling would have delivered by year-end 2026. Any additional inflationary forces — such as higher oil prices and their downstream effects on shipping — would push core inflation above and beyond forecasts made at the end of 2025.
The IEEPA tariffs announced in April 2025 had raised average U.S. import costs by approximately 12.1 percentage points and contributed roughly 0.8 percentage points to 12-month core PCE inflation by year-end 2025. The Supreme Court ruling struck down only the IEEPA-specific portion, leaving other tariff measures in place. The Dallas Fed noted that the United States Trade Representative has since started multiple tariff investigations, most prominently under Section 301 of the Trade Act of 1974, signaling an intention to introduce replacement measures that could push the average tariff rate back into the 12–13% range.
Under that scenario, the disinflationary effect of the court ruling narrows to roughly 0.1 percentage points by year-end 2026. The takeaway, the Dallas Fed said, is that the court ruling’s effect on inflation is real but modest, and its ultimate size depends on whether replacement tariffs are imposed — a development that businesses and consumers across the Dallas–Fort Worth metroplex will be watching closely.
