A Supreme Court ruling has upended President Donald Trump’s tariff plans, leaving international trade deals in limbo. Despite Trump’s Tuesday State of the Union defence of his strategy, partners worldwide question the pacts’ viability.
The Friday verdict struck down tariffs under the International Emergency Economic Powers Act (IEEPA) as presidential overreach on global imports. It undermines last year’s “Liberation Day” tariffs that spurred 18 bilateral agreements, per Council on Foreign Relations experts.
Trump replaced them with a 10% universal tariff under Section 122 of the Trade Act of 1974, effective Tuesday, hinting at 15% hikes.
“The tariff landscape, and therefore bargaining positions, remain in flux,” said Jennifer Hillman, Council on Foreign Relations senior fellow.
Rush deals now falter. “Those countries that were early in striking deals with the United States after the Liberation Day tariffs of last year have been sort of left holding the bag,” Sarang Shidore of the Quincy Institute told CNBC “Inside India” Monday.
“Whereas those other countries that resisted, like Brazil and others, in agreeing to any demands from the United States may be feeling a little more vindicated,” he added.
Japan’s 15% tariff pact for $550 billion investment sours. After the ruling, “they (Japan) are now paying to receive the same treatment as others,” said Natixis economist Alicia Garcia Herrero. Its trade minister warned of added burdens.
“[Trading partners] made concessions in exchange for specific tariff treatment that was grounded in IEEPA. That legal basis no longer exists,” said Johannes Fritz of the St.Gallen Endowment. “Whether the administration can rebuild those deals under Section 301 or other authorities remains to be seen, but that will take time and new legal processes,” he added.
Trump claimed “almost all countries and corporations want to keep the deal that they already made before the Supreme Court’s unfortunate involvement.” Yet India pauses talks pending clarity. The EU delays votes, eyeing retaliation. Canada cheers, with Ontario’s Doug Ford saying “the walls are closing in” on Trump.
Mexico and China review options warily. Trump threatens steeper duties via Truth Social and new Section 301 probes.
Fallbacks like Section 232 security tariffs loom, but CNBC warns of market dips, 0.5% IMF growth cuts, and inflation risks.