The Supreme Court's tariff ruling changes little in US trade policy

The United States Supreme Court’s rejection of Donald Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose country-specific tariffs has generated an explosion of headlines and rabid denunciations from the president himself. But the ruling’s economic impact on other countries and world trade is likely to be limited.

 

The IEEPA tariffs were probably already illegal under World Trade Organization (WTO) rules, as they violated the principle of equal treatment. In any case, Mr Trump has since imposed a new across-the-board 10 per cent tariff under a different law (Section 122 of the Trade Act of 1974), which he is threatening to raise to 15 per cent (the maximum allowed). Such a response is not good news for American households and firms, but it does bring the US closer to compliance with global trading rules.

 

In the near term, the new surcharge will create winners and losers. Before the IEEPA ruling, trade-weighted effective tariffs were roughly 36.8 per cent on Chinese exports, 22.3 per cent on India, 21.6 per cent on Vietnam, 23.5 per cent on Indonesia, 19.4 per cent on Thailand, 14.9 per cent on Japan, 12.8 per cent on South Korea, 11.6 per cent on Malaysia, and 6.7 per cent on Singapore. But now, with the new 10 per cent Section 122 tariffs, China’s effective rate will fall to about 26.9 per cent, India’s to 13.9 per cent, Vietnam’s to 16 per cent, Indonesia’s to 16.4 per cent, and Thailand’s to 14.8 per cent, while Japan and South Korea will face modest increases to 13.5 per cent and 12 per cent, respectively. Similarly, the European Union and the United Kingdom will be worse off than before the Court’s ruling, because they have made concessions to the US in their bilateral negotiations; but the concession from the US is in fact smaller than the removal of the IEEPA tariffs itself.

 

Mr Trump’s Trade Representative, Jamieson Greer, declared that the US will reconstruct the country-level tariffs through other means. Perhaps the winners and losers from the Supreme Court ruling are only temporary. The Trump administration has started a process of tapping into Section 232 (on national security) and Section 301 (on unfair trade practices) of the Trade Act of 1974 to restore many elements of the previous tariff landscape. Section 232 allows product-specific tariffs — such as a 25 per cent levy on steel — after a commerce department investigation, while Section 301 permits country-specific retaliation following a US trade representative inquiry. Because such investigations generally entail a great deal of discretion, Mr Trump could theoretically reimpose all the country-specific tariffs that were in place before the Supreme Court’s ruling.

 

While China appears to have benefitted the most from the Supreme Court decision, the relief will be temporary. The first Trump administration already used a Section 301 investigation to justify its high tariffs on Chinese imports. The Biden administration concluded in a subsequent review that some of China’s unfair trade practices had persisted and continued the Trump tariffs. Mr Trump can simply cite the Biden administration’s review as a basis to introduce new tariffs, with rates potentially higher than the IEEPA ones.

 

In principle, other countries can challenge unfair applications of Section 232 and Section 301 tariffs at the WTO, as both the EU and China have done in the past. But these efforts will not get very far, because the WTO Appellate Body has been inquorate since 2019, owing to America’s refusal to allow new judicial appointments. Indeed, a WTO panel ruled in 2020 that the first Trump administration’s 301 tariffs on China were not justified; but since the Appellate Body was not functioning, no final ruling could be issued.

 

The US has two additional advantages over other countries: Its ability to “weaponise commerce” and its ability to “commercialise weapons.” The US government can leverage its position as the world’s largest importing market to extract concessions from others, and it can leverage allies’ security dependencies to “induce” them into investment and trade concessions.

 

Mr Trump’s willingness to use both levers will make other governments think twice before taking the US to the WTO. For Japan, South Korea, and parts of Europe, security considerations would likely outweigh the benefits of litigation. The legal availability of a WTO dispute-settlement process is one thing; the political willingness to use it is quite another.

 

In the end, the Supreme Court’s ruling on Trump’s tariffs may modify the legal facade of US trade policy, as well as produce a brief surge of imports into the US. But it is unlikely to reduce the overall height — or significantly alter the country composition — of US trade barriers.

 

The author is professor of finance and economics at Columbia Business School and Columbia University’s School of International and Public Affairs.

 

©Project Syndicate, 2026