After SCOTUS decision, can Trump still pressure China on trade?

March is shaping up to be a tense month in China-US relations.

At the end of last month, we told you that US-China relations were on a steady (but fragile) path toward stabilization.

• Both countries seemed satisfied with the follow-through from their October meeting in Busan and have kept a lid on trade tensions ahead of Trump’s planned visit to China in late March and early April.

But a political development in the US has thrown a wrench into the gears: Last week, 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 trading partners.

• The IEEPA was the basis for Trump’s 34% Liberation Day tariffs and 20% fentanyl-related tariffs on China.

Surely the invalidation of Trump’s tariffs is good news for China, right?

• Not so fast.

Trump was furious with SCOTUS’s decision and immediately began searching for alternative legal avenues to keep tariffs in place.

• As a stopgap measure, he invoked the Trade Act of 1974 to impose a 10% flat tariff on all US trade partners, which will expire after 150 days unless approved by Congress.
• The administration is working on raising the figure to 15%.

Quick math: Even with the 15% tariff, the SCOTUS ruling will reduce China’s overall effective tariff rate.

The problem is, Washington may not stop there:

• On February 25, US Trade Representative Jamieson Greer hinted that the US could replace the affected tariffs with duties under a Section 301 investigation into China’s implementation of the 2020 Phase One Trade Deal.
• Greer also highlighted Section 301 investigations into forced labor and excess capacity as potential avenues for “reconstructing” Trump’s now-defunct Liberation Day tariffs.

Greer repeatedly emphasized that the administration’s goal was “continuity” rather than escalation – in other words, to bring tariff rates back to the level they were before the SCOTUS decision – but we’re not sure China will see it that way.

• Also on February 25, a Chinese Ministry of Commerce (MofCom) spokesperson defended China’s record in implementing the Phase One Trade Deal and warned the US against “shifting blame and…using the opportunity to create trouble.”
• MofCom also threatened countermeasures if Washington “uses the investigation as a pretext to introduce restrictive measures such as tariffs.”

Don’t panic: With just over a month until Trump’s trip to China, both sides have a strong incentive to keep relations on track and talk through any disagreements in person.

• But the confusion surrounding Trump’s tariff regime shows that there is still no shortage of trade-related gripes that could harm the long-term prospects for Sino-American stabilization.

Additionally, SCOTUS taking away Trump’s favorite weapon (massive, at-whim tariffs and the threat thereof) is not necessarily an unalloyed win for China.

• Trump may now turn to other levers to pressure Beijing in future disagreements, including increased support for Taiwan, tighter export controls, and financial sanctions, among others.
• This would move the China-US rivalry into less familiar and possibly more dangerous territory.

For its part, China still has a strong hand to play against the US.

• Rare earth export controls remain Beijing’s ace-in-the-hole to use against all manner of American chicanery and will be for the foreseeable future.
• With Trump’s tariffs now increasingly subject to Congressional oversight, China could crank up the pain on business in key US constituencies in a bid to hurt Republicans’ electoral chances in the 2026 midterms, hamstringing the White House.

We’ll say it again: Tensions are under control for now, but that doesn’t mean they’ll stay that way.

• Assuming relations don’t break down in the next month, businesses should be prepared to capitalize on the good vibes from Trump’s upcoming China visit to address supply chain vulnerabilities.
• While global business has grown accustomed to the perpetual threat of US tariffs, the SCOTUS ruling should prompt multinationals to assess which other aspects of the US lawfare toolbox they are exposed to and update their risk mitigation strategies accordingly.

Most of all, global business should monitor for signs of new or renewed disagreements that could fray the fragile Sino-American equilibrium.

• Each breakdown in ties makes it less likely that future agreements will hold and harms prospects for long-term stabilization.

Joe Mazur, Head of Geopolitical Research, Trivium China