US Supreme Court strikes down most Trump tariffs
And just like that, the world was liberated from Liberation Day.
- Sort of.
On February 20, the US Supreme Court (SCOTUS) ruled that US President Donald Trump overstepped his authority in invoking the International Emergency Economic Powers Act (IEEPA) to impose sweeping tariffs on most US trade partners.
Some context: The IEEPA was the basis for Trump’s 34% Liberation Day tariffs and 20% fentanyl-related tariffs on China.
- Following the Xi-Trump meeting in Busan, the US cancelled 10% of the fentanyl tariffs and agreed to continue suspending 24% of its Liberation Day tariffs on China.
Trump railed against the decision on Truth Social, vowing to impose a 10% global tariff to replace the duties struck down by SCOUTS before revising the figure up to 15% on February 21, invoking the Trade Act of 1974.
- The law allows the tariffs to remain in place for 150 days before requiring congressional approval.
- The Trump administration has also signaled it could launch country-specific investigations under Section 301 of the act.
Quick math: Goldman Sachs estimates that the removal of the IEEPA tariffs combined with the new 15% global tariffs has reduced China’s effective tariff rate by around 6.6 percentage points (Nikkei).
In response, China’s Ministry of Commerce said Beijing “has consistently opposed all forms of unilateral tariff increases” and that China would “closely monitor” any alternative measures put forward by the Trump administration.
Our take: Without the power to threaten massive tariffs at will, Trump’s hand for negotiations with China is weakened.
Our other take: New efforts by the Trump administration to reimpose tariffs on China through other channels will likely be viewed by Beijing as a violation of the US-China trade truce.
- That increases the risk that the US-China trade war enters a new period of escalation.