Policy shock, market reaction — now layered with tax‑credit compliance risk

Last week’s Supreme Court opinion—issued by a 6–3 majority—narrowed the executive branch’s reliance on the International Emergency Economic Powers Act (IEEPA) as the legal basis for a recent package of broad import levies. The decision removed the most expedient statutory route the White House had used for rapid tariff action but did not instantly unwind duties already in place.

Within hours the administration signaled an administrative pivot: officials moved to impose a temporary, across‑the‑board 10% surcharge under Section 122 of the Trade Act, a stopgap measure that by statute lapses after roughly 150 days unless Congress acts. In parallel, agencies and market participants are openly exploring alternative, statute‑specific authorities (for example, Section 232 national‑security duties and Section 301 trade remedies) as possible replacements—creating a live “tariff substitution” risk that lenders and sponsors now treat as an ongoing tail event.

Numbers reported in public commentary vary by accounting frame. One common read places roughly $133 billion of duties collected at customs under the IEEPA pathway into an unsettled legal posture; fiscal‑year‑to‑date receipts tied to the episode were reported near $124 billion through November 2025, and recent monthly collections approached $30 billion. Broader, cumulative exposure estimates—produced when analysts aggregate multiple statutes, peak‑year flows and pro‑rated exposures—cluster in higher ranges commonly cited near $175–$199 billion and in some headlines push toward $240 billion. Those differences matter: the $133 billion figure refers to duties directly traceable to the invalidated IEEPA basis, while larger totals fold in other authorities and time windows and are not automatically eligible for IEEPA‑specific remedies.

At the same time, the U.S. Department of the Treasury and the Internal Revenue Service issued interim enforcement guidance tightening eligibility for several federal clean‑energy tax incentives where projects rely materially on specified Chinese‑origin components. That guidance is provisional, opens a 45‑day public comment window, and raises documentation and origin‑tracing burdens for project sponsors, module and component manufacturers, and their auditors.

The two developments operate through distinct but reinforcing channels. The court ruling increases tariff‑policy volatility and the risk of statute‑specific reissuance or retroactive adjustment; the interim Treasury/IRS tests reduce the certainty that projected tax credits will be available when relied upon in financial models. Lenders and equity investors have responded by widening contingency reserves, shortening tenors, and demanding higher returns—moves that mechanically raise weighted average cost of capital (WACC) and, for marginal projects, the levelized cost of energy (LCOE).

Market and model sensitivity is meaningful: analysis and market feedback point to utility‑scale solar WACC increases in the ~25–75 basis‑point range under persistent policy volatility and merchant battery storage (highly dependent on imported cells and power electronics) exhibiting larger sensitivity in the ~75–150 basis‑point range. Illustrative project‑level impacts include an LCOE uptick of roughly $2–$4/MWh for a 200 MW solar project driven by financing repricing, and an example $3 billion gigafactory facing incremental capex and compliance burdens in the low‑hundreds of millions if part costs and audit/compliance overheads rise several percentage points.

Practical remedial timelines and operational frictions further lengthen uncertainty. Trade‑law specialists expect prioritized administrative refund claims to roll out in roughly 12–18 months for well‑documented payers; broader litigation, multi‑forum disputes and political pushback could stretch full recoveries into multiple years or render mass restitution incomplete. Customs and Border Protection’s duty‑refund processes were not designed for tens of thousands of near‑simultaneous claims and may require temporary rulemaking or special protocols—steps that themselves can prompt new litigation.

Supply‑chain realities amplify the policy signal: long lead times for critical transformers, concentrated cell and transformer manufacturing, and limited domestic alternatives mean procurement cannot be re‑engineered overnight. Meanwhile, the interim Treasury/IRS guidance is spawning a compliance layer—origin tracing, certification and auditing services—that will add cost and timing friction during the transition window.

Policy follow‑through will determine persistence. If agencies, CBP and Treasury provide clear administrative mechanics for refunds and Congress or the executive branch supplies multi‑year clarity—plus final Treasury/IRS rules that establish predictable compliance pathways—capital markets should recalibrate and much of the drag will fade. If, instead, tariff substitution remains paired with provisional tax‑credit tests, financing costs will stay structurally higher and project pacing will slow, trimming deployment in marginal procurements.

In short: U.S. clean‑energy growth fundamentals (federal incentives, state mandates and corporate procurement) remain tailwinds, but a compound regime of legal substitution risk and tightened tax‑credit enforcement raises the policy premium that now governs capital allocation for long‑lived energy infrastructure.