Supreme Court "hits the brakes," Trump "steps on the gas": Tariff tensions flare again!

The fifth day of the Lunar New Year is traditionally the day for Chinese people to “welcome the God of Wealth,” with markets hoping for prosperity and smooth sailing. But in Washington, what was welcomed instead was a judicial “headwind.” On February 20th, U.S. Supreme Court ruled 6-3 that the broad tariffs imposed by the Trump administration under the International Emergency Economic Powers Act (IEEPA) lacked legal authorization. Within hours, the White House reversed course, with Trump announcing a 10% global tariff on top of existing tariffs. All current national security tariffs will take full effect immediately.

A new round of tug-of-war over trade and presidential authority has begun.

Sources told The New York Times that at the time of the Supreme Court decision, Trump was meeting with governors at the White House. An aide handed him a note, and he reportedly called the ruling “disappointing.” Later, at a press conference, Trump lashed out at the Supreme Court justices, calling them “fools and pawns.”

Not Just Tariffs Stopped

The majority opinion of the Supreme Court held that IEEPA does not grant the president unilateral authority to impose tariffs broadly on global goods. In other words, while the president can declare a state of emergency, he cannot establish a normalized tariff system based on that.

This ruling has at least two significant practical impacts.

First, on policy implementation. The core tariff framework relied upon by Trump over the past year has been overturned. While some tariffs based on national security (Section 232) or Section 301 investigations may remain, the most efficient and comprehensive tools have been struck down by the judiciary.

Second, on fiscal matters. Multiple agencies estimate that if these tariffs are ultimately invalidated, the U.S. government could face large-scale refund obligations, potentially reaching hundreds of billions of dollars. Bloomberg quoted trade lawyers saying that refund issues “will become the focus of the next round of litigation.”

More importantly, policy certainty is decreasing. Businesses cannot predict the structure of trade costs over the next six months—and this is precisely the variable most feared in global supply chains.

Trump’s “Backup Button”

In response to the ruling, Trump’s tone was very firm. He stated, “There are many ways, many powers.”

The White House plans to implement a temporary 10% global tariff within days under Section 122, lasting 150 days. If Congress does not extend it, the measure will automatically expire. This clause has been rarely used historically and was originally designed as a short-term tool to balance trade deficits.

At the same time, Trump has not ruled out pushing for legislation in Congress to give the president clearer tariff authority. Some Republican lawmakers have publicly expressed support. However, given the narrow margin in both chambers, whether this can be smoothly pushed through remains uncertain.

A Republican strategist told the media that tariffs are the “cornerstone” of Trump’s economic agenda, “and he won’t give up easily.”

Yale University’s Budget Experimentation Lab has been modeling the impact of Trump’s tariff policies during his term and released the latest report based on the president’s recent remarks.

According to the lab’s estimates, before today’s Supreme Court ruling, the overall effective tariff rate (the average tax rate on all imports) was 16.9%. If the tariffs struck down by the Supreme Court are invalidated and not replaced, this figure would drop to 9.1%.

However, if Trump proceeds with his plan to impose a 10% tariff on all goods based on different legal grounds—and if he can sustain this policy—the lab estimates the final actual tariff rate could reach 15.4%, nearly returning to the level before the ruling.

Market Reaction Is Tepid

Market volatility was modest that day, with the major U.S. stock indices rising. Investors believed that corporate cost pressures might temporarily ease. The S&P 500 sectors reliant on imported components, such as manufacturing and retail, saw relatively notable gains. Cryptocurrency markets experienced short-term boosts, with Bitcoin approaching $68,000 and some altcoins rising over 5%. Analysts pointed out that the easing of trade friction expectations boosted risk appetite.

However, as Trump announced a new round of tariffs, gains quickly tempered. Markets soon realized this was not the end of policy but a reshaping of the path forward.

Economic and Political Pressures

The complexity of tariffs lies in their dual role as economic tools and political issues.

Economically, tariffs are often viewed as policies that raise import costs and potentially push up prices. Some Republicans privately acknowledge that tariffs could hinder economic growth, especially with midterm elections approaching.

John Eiselin, deputy director of economic analysis at Yale’s Budget Experimentation Lab, stated that Trump’s tariffs have yet to achieve their goals of revitalizing U.S. manufacturing or reducing the trade deficit. Even economists generally opposed to import taxes admit that tariffs have successfully increased government revenue.

John said, “Frankly, compared to other revenue-raising options, tariffs are a more regressive way to increase revenue; a large body of economic literature documents their negative economic impacts. But at the same time, we do need substantial fiscal income in the coming decades.”

Politically, Democrats have made “rising living costs” a primary attack point. A Democratic strategist in Pennsylvania told NBC that the price pressures caused by tariffs “are already having tangible effects.”

Meanwhile, Trump’s camp emphasizes trade balance and manufacturing resurgence, viewing tariffs as necessary measures.

The core of this debate is not just about trade itself but about the boundaries of presidential power during economic emergencies.

What’s Next?

In the coming weeks, three issues warrant close attention:

First, whether the newly announced 10% temporary tariffs will be implemented as scheduled and whether the scope will expand;

Second, whether refund issues will enter judicial proceedings and the scale of fiscal impact;

Third, whether Congress will attempt to pass legislation to grant clearer tariff authority.

In the short term, markets may fluctuate between “risk mitigation” and “policy uncertainty.”

In the medium term, corporate decision-makers might delay some investments and expansion plans while awaiting policy clarity.

Long-term, this ruling could reshape the legal framework of U.S. trade policy.

A former federal trade official told Bloomberg, “What really matters is not this round of tariffs but what the president can do in the future.”

Author: Seed.eth