Fridays used to be reserved for routine headlines. But since Donald Trump’s reelection, every Friday seems like a bombshell day.
And last Friday delivered a constitutional jolt to global trade. In a 6–3 ruling, the US Supreme Court struck down President Donald Trump’s use of emergency powers to impose sweeping tariffs, removing the executive “on-off switch” that had defined his trade policy.
Within hours, Trump imposed a 10% global tariff under Section 122 of the 1974 Trade Act, then raised it to 15%.
Now the whole architecture behind Trump’s tariffs is disappearing, and the implications are massive. For the US, for China, for Europe, for India and every other trade partner.
What the court stopped and what remains
The Court ruled that the International Emergency Economic Powers Act does not authorise a president to levy tariffs. Chief Justice John Roberts wrote that accepting Trump’s reading would represent a “transformative expansion” of executive authority. The Constitution grants Congress the power to impose duties.
However, other statutes remain. Section 122 allows tariffs of up to 15% for 150 days.
Sections 201, 232 and 301 allow duties after investigations tied to safeguards, national security or unfair trade practices. Trump moved immediately to Section 122, setting a 15% global rate.
Bloomberg estimates the effective average tariff rate will still sit around 11% to 12%, roughly four times the pre-Trump level.
Goldman Sachs calculates that the total increase in effective tariff rates since early 2025 will ease slightly, from just over 10 percentage points to about 9.
The legal path changed, but the economic burden remains elevated.
Source: Joey Politano on X
The leverage question
Before the ruling, the White House could escalate tariffs against specific countries within days. That tool now requires investigations and procedural steps. The loss is speed.
China feels the difference first.
Morgan Stanley estimates the weighted average tariff rate on Asian exports to the US will fall from 20% to 17%.
Average levies on Chinese goods decline to about 24% from 32%. The 10% fentanyl tariff disappears. Beijing enters the March 31 summit with lower immediate pressure.
US Trade Representative Jamieson Greer insists the administration still holds leverage. “We have tariffs like this already in place on China, we have open investigations already,” he said.
Average tariffs on China remain around 40% under other authorities.
Yet escalation is slower and less discretionary. And for negotiations, tempo often equals power.
Europe’s credibility test
Last summer, the European Union accepted a deal that imposed a 15% US tariff on most EU exports while removing tariffs on American goods entering the bloc.
Steel and aluminium from Europe still face 50% duties.
The agreement aimed to avoid a broader trade conflict.
Now European lawmakers are reconsidering. Some members of the European Parliament’s trade committee called the situation “pure customs chaos” and proposed freezing ratification until the US provides clarity.
European Central Bank President Christine Lagarde said on CBS that it is “critically important” to know the rules of the road before entering into trade commitments.
Her concern centres on predictability. Businesses had adapted to earlier arrangements. Rapid resets undermine that equilibrium.
The US position is continuity as they claim that existing deals stand and partners should honour them.
The tension reveals a new variable in global trade. It is not the headline tariff rate but whether counterparties trust the durability of US commitments.
Who wins and who loses from 15%
The new 15% global tariff compresses differences across countries. That creates relative winners.
China, India and Brazil benefit from lower average rates compared with the invalidated emergency regime.
Canada and Mexico gain from the removal of fentanyl related duties and from USMCA exemptions if those remain intact.
Chinese equities in Hong Kong rallied after the ruling.
Source: Bloomberg
Countries that had secured 10% rates under earlier negotiations, such as the UK and Australia, now face 15%. Japan loses its relative advantage at that level.
Bloomberg calculates that the new regime brings the effective average tariff rate down to roughly 12%, the lowest since the so-called Liberation Day tariffs in April.
Goldman Sachs expects some pickup in imports from countries experiencing reductions, although overall GDP effects should remain limited due to inventory adjustments and rerouting.
Did tariffs deliver economically?
The administration’s original aims with tariffs were to reduce the trade deficit and revive manufacturing.
Recent analysis reveals who ultimately bore the cost of the import duties and how that filtered through to prices and growth.
In aggregate, the US trade deficit remains largely unchanged, manufacturing has not experienced a sustained revival, and most of the tariff burden has been passed through to American importers and consumers rather than absorbed by foreign exporters.
The economy has avoided a sharp downturn, supported by strong AI-related investment, but the structural transformation initially promised has yet to materialise.
The refund overhang and the power debate
Ultimately, the Court’s decision may trigger up to $170 billion in refunds to importers. More than 1,500 lawsuits have already been filed in the US Court of International Trade.
If refunds materialise in 2026, economists at Yale’s Budget Lab suggest they could temporarily offset some growth drag from remaining tariffs.
But the larger consequence is not fiscal. It is geopolitical.
Under IEEPA, the White House had the ability to raise or lower tariffs on specific countries almost instantly.
That tool allowed Trump to pressure China ahead of negotiations, threaten European governments during disputes over Greenland or defence spending, and tie tariff relief to concrete concessions such as soybean purchases or rare earth flows.
It gave the presidency direct leverage over both foreign governments and multinational companies. But that instrument is now constrained.
Trump can still impose tariffs under Sections 301 or 232, but those require investigations and time. Section 122 caps rates at 15% and expires after 150 days.
The element of surprise is reduced. The credible threat of overnight escalation is weaker.
China enters the upcoming talks facing lower average tariff pressure than before. European lawmakers are openly questioning whether to freeze ratification of their trade deal. India has already delayed discussions.
Allies that once negotiated preferential terms now see a flatter playing field.
Before the ruling, leverage came from unilateral action. Now it depends more on persuasion and statutory process.
Tariffs remain. Protectionism remains. But the presidency no longer holds the same discretionary trigger. In global trade politics, speed and asymmetry often define bargaining power. Those have been curtailed.
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