BCA predicts U.S. trade tensions will ease through 2026 but escalate sharply by 2027 as legal constraints and midterm elections limit aggressive tariff hikes this year, according to a new report. The Supreme Court ruling curtailing President Trump's emergency tariff powers reinforces congressional control over trade policy, making major escalation unlikely before the 2026 elections.

Instead, policymakers will likely rely on narrower tools like temporary tariffs under existing laws, modestly lifting the effective U.S. tariff rate before it eases again. Iran tensions pose a more immediate market risk, with BCA estimating a 38% probability of a major oil shock that could overshadow tariff volatility and keep investors focused on energy markets and inflation. While tariffs may intensify after the political cycle shifts, the report suggests investors should prioritize geopolitical energy risks and broader macro conditions in the near term, with U.S. equities and oil markets remaining key areas to watch.