Morgan Stanley’s Zezas on 2026 Policy Catalysts: Tariffs, Fed Independence, AI Regulation

This analysis is based on Michael Zezas’ CNBC interview [1] and complementary market data [0]. The Supreme Court is reviewing the legality of Trump administration tariffs imposed under the International Emergency Economic Powers Act (IEEPA), with a ruling expected by June 2026 [3][8]. A ruling invalidating tariffs could require refunds of $89 billion collected since implementation and jeopardize $350 billion in annual tariff revenue [2][3], altering FY2026 U.S. deficit projections. The industrials sector’s 0.245% decline on December 19 [0] reflects short-term uncertainty for trade-exposed industries (e.g., consumer goods, automotives).

Fed independence is at risk as Trump narrows his shortlist for the next Fed chair [5]. The central bank’s 2025 accommodative policy has shaped market expectations, and perceived political interference could disrupt 2026 monetary policy forecasts [6]. AI remains a core 2026 investment theme [4][7], but Trump’s AI policy has divided the GOP on federal preemption versus state-level regulation [9], creating regulatory uncertainty for AI-related sectors (tech, data centers).

1. The tariff ruling’s mid-2026 timing aligns with Fed chair selection, amplifying potential market volatility from overlapping policy shifts.
2. AI’s strong growth potential coexists with regulatory fragmentation risks, requiring monitoring of GOP alignment on preemption.
3. Fiscal impacts from tariff revenue changes could indirectly influence Fed policy decisions, creating a cross-domain risk dynamic.

• Tariff Volatility
  : A negative ruling could disrupt trade-exposed sectors and government fiscal plans.
• Fed Independence Concerns
  : Political interference in chair selection could destabilize rate expectations.
• AI Regulatory Delay
  : GOP divisions may prolong uncertainty for tech firms.

• Clarity from Tariff Ruling
  : A decisive outcome could reduce trade uncertainty for global supply chains.
• Fed Stability
  : Continuity in leadership could reinforce monetary policy credibility.
• AI Growth
  : Well-positioned firms may still capitalize on AI’s expansion despite regulatory talks.

Critical data points include $89 billion in potential tariff refunds [3], $350 billion in annual tariff revenue at risk [2], and the industrials sector’s 0.245% decline on December 19 [0]. The three policy catalysts—tariffs, Fed independence, and AI regulation—are interconnected, with timing and political dynamics shaping 2026 market outcomes. Decision-makers should monitor ruling timelines, Fed candidate stances, and AI policy negotiations.