India, China among winners after US Supreme Court blocks Trump tariffs

China, India and Brazil are among those now seeing lower tariff rates after SC ruled that Trump's use of the International Emergency Economic Powers Act to impose duties was illegal

By Malcolm Scott

 

In a swift reversal of fortunes, countries that had been hardest hit by US President Donald Trump’s tariffs have emerged as the biggest winners from the Supreme Court’s decision to strike down his emergency levies. 

 

China, India and Brazil are among those now seeing lower tariff rates for shipments to the US after the court ruled on Friday that Trump’s use of the International Emergency Economic Powers Act to impose duties was illegal. While Trump subsequently announced plans for a 15 per cent global rate, Bloomberg Economics calculated that would mean an average effective tariff rate of around 12 per cent — the lowest since his “Liberation Day” tariffs were released in April.

 

 

For Asia, Morgan Stanley economists say the weighted average tariff rate will fall to 17 per cent from 20 per cent, with average levies on goods from China declining to 24 per cent from 32 per cent. Relief may be temporary as the Trump administration seeks to impose sectoral and economy-specific duties to rebuild its tariff regime.

 

Still, “the peak level of uncertainty on tariffs and trade tensions has passed,” Morgan Stanley economists led by Chetan Ahya wrote in a note. 

 

The new across-the-board levy effectively resets the playing field for America’s trade partners. For the likes of China, which also saw a 10 per cent fentanyl tariff scrapped by the courts, exports now face less punitive rates. Losers include economies including the UK and Australia that had negotiated lower levies of 10 per cent under the old “reciprocal” framework. 

 

Senior US officials are pressing partners including the European Union and Japan to stick to commitments they made in earlier negotiations. They also sought continuity in the one-year truce with China, with Trump planning to soon visit Beijing for a meeting with President Xi Jinping. China, in the midst of a long holiday, has yet to officially comment on the Supreme Court decision. 

 

“We want to make sure that China is complying with its part of the deal,” US Trade Representative Jamieson Greer told Fox News Sunday. “So that means they continue to buy the products they said they would buy.”

 

Canada and Mexico had also faced fentanyl-related levies, so they win out as those no longer apply. If exemptions under the US-Mexico-Canada (USMCA) trade agreement remain in place, they’ll emerge in a “very favorable position,” BE analysts Nicole Gorton-Caratelli, Chris Kennedy and Maeva Cousin wrote in a note. 

 

The new 15 per cent levy leaves countries with the earlier 10 per cent rate worse off, with Australia and the UK in that position. Meantime, those that previously had what was then a competitive 15 per cent level applied on their exports — such as Japan — have now seen that advantage stripped away. 

 

Even as the court ruling adds a fresh layer of uncertainty, analysts are pointing to the resilience of global commerce over the past year and the relatively minor shift in the overall average tariff rate to suggest the near-term effects may prove limited. 

 

Economists at Goldman Sachs Group Inc. including David Mericle estimate that the combination of the Supreme Court ruling and the newly announced Sec. 122 tariff will reduce the increase in the effective tariff rate since the start of 2025 from just over 10 percentage points to 9 percentage points.

 

“Imports from countries that will experience meaningful tariff reductions from the latest policy changes are likely to pick up in coming months,” the economists wrote. “But the impact on GDP should be largely offset by increased inventory accumulation and consumption, reduced imports from other countries through which trade had been rerouted, and small reductions in imports from countries whose tariff rate has risen.”