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Michael Gasiorek

Centre Director

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The US Supreme Court has now ruled that the tariffs President Trump imposed, under the auspices of the International Emergency Economic Powers Act (IEEPA) legislation, are illegal. This is a major and significant ruling and a significant internal setback to Trump’s tariff policy. However, it does not stop it. Some of the sector-specific tariffs have been levied under different legislation (Section 232, Section 301) to the IEEPA. Following the decision of the Supreme Court, President Trump has already stated that the US will continue to pursue those routes as well as others that may be open to it – notably Section 122.

The mess is manifold, and of course, will, in good part, depend on the response of the Trump administration. One element of the mess concerns the potential refunds that may now be due on the many billions of tariff revenue that has now been (illegally) collected. Interestingly, the Supreme Court did not rule on this, leaving this to the lower courts and probably the US Court of International Trade to deal with. A second element is what use will now be made of the alternative legislative options open to the US administration. These appear to be:

• Section 232 of the Trade Expansion Act (1968) on grounds of national security – currently levied, inter alia, on steel, aluminium, furniture, and automobiles.
• Section 301 of the Trade Act (1974) on grounds to combat unfair foreign trade practices that burden or restrict U.S. commerce – currently primarily used against China across a range of goods.
• Section 122 of the Trade Act (1974) – which allows the President to levy a tariff of up to 15 percent on all countries to address issues related to the trade deficit and the balance of payments. The tariff can be levied for 150 days unless Congress votes to extend it. President Trump almost immediately announced he will levy an additional tariff of 10% (i.e. on top of existing legal tariffs), and then 24 hours later, stated that would be raised that to 15% – though with a long list of exceptions: Some critical minerals, some agricultural goods, natural resources and fertilizers that cannot be grown, mined, or otherwise produced in the United States, pharmaceuticals, electronics, passenger vehicles, and other transport and informational materials.
• Section 338 of the Tariff Act (1930) – which provides grounds for tariffs of up to 50% where countries are perceived to discriminate against US commerce. It would be perhaps ironic if this route were used, as the US administration has been arguing at the World Trade Organization (WTO) that it should be able to discriminate.

The third element is what the decision by the Supreme Court does to the various deals the US has struck with a range of countries, from the first deal with the UK in May (2025) through to the deal signed with Indonesia just last week. The legality of these deals within the US is complicated, and just because they were framed around the IEEPA reciprocal tariffs, which have been deemed illegal, does not necessarily invalidate the trade deals, or perhaps more accurately, invalidate all aspects of these deals, many of which are still under negotiation. I leave this for my lawyer friends and colleagues to grapple with.

Even if the deals have no legality, or just the tariff elements are not legal, this does not mean that the agreements will be shelved or dropped by the US, nor that the partner countries will choose to renege on them. Countries may stick to their side of the bargain in anticipation of Trump reimposing tariffs by other means. By acquiescing to the bullying tactics of Trump, countries have demonstrated that they are prepared to back down, and to some extent have already revealed their hands as to how far they are prepared to go. It seems unlikely that the Supreme Court ruling will embolden them to act otherwise. Unless countries manage to act in response to Trump in a coordinated fashion, they will continue to be picked off, and the roller coaster will continue.

So, while the Supreme Court ruling is a major setback to Trump’s tariff policy, it will not stop it. Given how much Trump ‘loves’ tariffs, we have not seen the end of this saga by any means. It is likely to be messy and create uncertainty – none of which is good for businesses, and thus it negatively impacts on US and global economic growth and prosperity.