US Supreme Court Overturns Trump Tariff Framework, Sparking Policy Shifts
The recent decision by the US Supreme Court to strike down President Donald Trump's tariff framework has the potential to reshape the policy landscape and influence the current climate of uncertainty in global trade. According to a detailed report from SBI Research, this landmark judgment could compel countries to adopt a "counter-intuitive" approach in negotiations during the interim phase, as the ultimate authority on tariff matters now rests with a closely divided US Congress.
Court Ruling Invalidates Use of Emergency Powers for Tariffs
The Supreme Court's ruling invalidated President Trump's use of the International Emergency Economic Powers Act (IEEPA) of 1977 to impose tariffs. SBI Research highlighted that this statute had never been previously deployed by any President for tariff imposition and has limited applicability during peacetime. This decision marks a significant shift in how executive power is exercised in trade policy, potentially upending long-standing practices.
Executive Branch Responds with New Tariff Measures
In response to the verdict, the executive branch has turned to Section 122 of the Trade Act of 1974 to introduce a temporary 10% global tariff on all imports into the United States. The report noted that this is the first time Section 122 powers have been exercised. This measure is scheduled to come into force on February 24, 2026, and will run for 150 days, ending in July unless Congress approves its continuation.
Under the provisions of the Trade Act, the President is authorized to impose temporary import surcharges of up to 15% or apply quotas to address balance of payments concerns. However, such actions cannot extend beyond 150 days without legislative approval from lawmakers.
Carve-Outs and Exemptions in New Tariff Structure
The newly imposed 10% tariff includes specific carve-outs. Goods from Canada and Mexico that meet the requirements of the US-Mexico-Canada Agreement (USMCA) are exempt, as are certain national security tariffs that are already operational. These exemptions aim to mitigate disruptions for key trading partners while maintaining strategic interests.
SBI Research Warns of Complications and Strategic Implications
SBI Research cautioned that the interaction between inter-sovereign treaties and the actions of juristic persons on tariff issues could complicate, and possibly disrupt, efforts to establish a consistent tariff regime. The report emphasized that jurisdictions need to implement counter-intuitive negotiations to position themselves strategically during this intermittent period.
Furthermore, the administration is expected to use the interim window to complete investigations and potentially impose tariffs through Section 301 and Section 232 mechanisms. The court's ruling may not fully block Trump from introducing similar tariffs under other statutory authorities, adding another layer of complexity.
Potential Impact on Existing Trade Agreements
The report also warned of implications for existing trade arrangements. Since IEEPA-related tariffs have supported trade agreements worth trillions of dollars, including those involving China, the United Kingdom, and Japan, the judgment could create fresh uncertainty around several current deals. This development underscores the need for careful navigation in international trade dynamics.
In summary, the Supreme Court's decision has introduced a new era of uncertainty in global trade policy, with SBI Research advising proactive and strategic negotiations to adapt to the evolving landscape.
