If the Supreme Court rules that Trump’s tariffs were illegal, the U.S. Dollar Index (DXY) would almost certainly weaken, and the mechanism is very straightforward once you break it into its macro components.

How a SCOTUS Reversal Hits the Dollar

1. Tariff removal = surge in imports = wider trade deficit = DXY pressure

Tariffs suppress imports. Remove them suddenly, and U.S. demand for foreign goods jumps.
That means:

• More dollars sold to buy foreign currencies
• A wider U.S. trade deficit
• A mechanical drag on DXY

This is one of the cleanest, most reliable macro channels.

2. Refunds of tariff revenue = liquidity injection = dollar dilution

If tariffs are ruled illegal, the government may owe hundreds of billions in refunds to importers.

That’s effectively:

• A large, unplanned fiscal outflow
• A net liquidity injection into the private sector
• A dollar‑negative impulse, similar to a surprise easing event

Liquidity injections weaken the dollar unless offset by tighter Fed policy—which is unlikely in this scenario.

3. Markets will price in “less protectionism” = lower domestic inflation = lower yields

Tariffs are inflationary. Removing them is disinflationary.

Lower inflation expectations → lower Treasury yields → weaker dollar.

DXY is extremely yield‑sensitive, so this channel matters.

4. Global risk sentiment improves → capital rotates out of USD

Tariff removal reduces geopolitical and trade‑war uncertainty.

That typically leads to:

• Stronger EM FX
• Stronger commodity currencies (AUD, CAD)
• Outflows from USD safe‑haven positioning

This is another direct DXY headwind.

Net Effect: DXY Weakens

Across all channels—trade flows, liquidity, yields, and risk sentiment—the direction is the same.

A SCOTUS ruling against the tariffs is a structurally dollar‑negative event.

The magnitude depends on the details, but the sign is not ambiguous.