'Exceeded authority': US Supreme Court strikes down Trump's global tariffs

The US Supreme Court struck down President Donald Trump’s sweeping global tariffs that he pursued under a law meant for use in national emergencies, undercutting his signature economic policy and delivering his biggest legal defeat since he returned to the White House.

 

The ruling came weeks after India and the US issued a joint statement towards an interim trade agreement on February 7 stating the contours of the deal. Delhi-based think tank Global Trade Research Initiative (GTRI) said the ruling should prompt India to re-examine its trade deal with Washington.

 

Voting 6-3, the US court said Trump exceeded his authority by invoking the 1997 law to impose his “reciprocal” tariffs across the globe as well as targeted import taxes the administration says address fentanyl trafficking. Stocks rose while bonds fell alongside the dollar, with investors trying to figure out how much the ruling changes US trade policy. Over 300 shares in the S&P 500 rose, with the gauge extending this week’s advance.

 

 

In a meeting with state governors at the White House, Trump called the decision “a disgrace” and told them he has a backup plan to reinstate the measures, reported CNN. The White House has said it will quickly replace the levies using other legal tools.   The justices didn’t address the extent to which importers are entitled to refunds, leaving it to a lower court to sort out those issues. If fully allowed, refunds could total as much as $170 billion — more than half the total revenue Trump’s tariffs have brought in.

 

According to GTRI report, the decision effectively renders recent trade deals initiated or concluded by the US with the UK, Japan, the EU, Malaysia, Indonesia, Vietnam and India one-sided and useless. Partner countries may now find reasons to dump these deals.

 

As a first step, the US removed the 25 per cent punitive tariffs imposed on India ‘in recognition of India’s commitment to stop purchasing Russian Federation oil’. The tariff is expected to reduce further this month, from the existing 25 per cent to 18 per cent.  Both sides aim to sign the deal by March.

 

The removal of reciprocal tariffs will free about 55 per cent of India’s exports to the US from the 18 per cent duty, leaving them subject only to standard most-favoured nation (MFN) tariffs as per global trade rules.

 

On the remaining exports, Section 232 tariffs will continue — 50 per cent on steel and aluminium and 25 per cent on certain auto components — while products accounting for roughly 40 per cent of export value, including smartphones, petroleum products and medicines, will remain exempt from US tariffs, GTRI said in a report.

 

“Trump could attempt to reimpose similar tariffs under Section 301 or Section 232, but those statutes require new investigations and public justification, delaying action and inviting further legal challenges. Also, such measures cannot serve as a universal enforcement tool. This ruling against Trump would reassert Congress’s primacy in trade policy, sharply curbing presidential latitude to weaponise tariffs and reshaping how future administrations wield emergency economic powers,” the GTRI said.

 

The ruling strikes at the heart of Trump’s agenda, blunting an all-purpose cudgel he has enthusiastically wielded against trading partners. Trump this month set up a process to impose tariffs as high as 25 per cent on goods from countries doing business with Iran. He previously threatened to impose tariffs on European countries resisting his attempt to take over Greenland.

 

The decision could cut the US average effective tariff rate by more than half. A Bloomberg Economics analysis before the ruling concluded that a broad decision against Trump would reduce the rate from 13.6 per cent to 6.5 per cent, a level not seen since March.

 

The high court majority said the law doesn’t authorise tariffs. IEEPA, as the law is known, gives the president a panoply of tools to address national security, foreign policy and economic emergencies but doesn’t explicitly mention tariffs or taxes.

 

“When Congress grants the power to impose tariffs, it does so clearly and with careful constraints,” Chief Justice John Roberts wrote in the court’s majority opinion. “It did neither here.”

 

Two Trump appointees — Justices Neil Gorsuch and Amy Coney Barrett — joined Roberts and the court’s three liberals in the majority.  Justices Brett Kavanaugh, Clarence Thomas and Samuel Alito dissented.

 

Kavanaugh wrote that the refund process was “likely to be a ‘mess,’ as was acknowledged at oral argument.”  Trump has called tariffs “my favourite word” and vowed they will “make us rich as hell.”

 

(With inputs from Shreya Nandi)