The Supreme Court has dealt a blow to US President Donald Trump’s favourite economic agenda – tariffs, to the extent that the US President has called the ruling a ‘disgrace’. Trump’s reciprocal tariffs have been called illegal by the apex court, The Supreme Court of the United States on Friday said that President Donald Trump exceeded his legal authority by invoking emergency economic powers to levy tariffs — a rare reprimand that delivers a significant setback to his economic program.What does the ruling mean? We take a look:
Lower tariff burden: At least for the moment!
With certain levies imposed under the International Emergency Economic Powers Act (IEEPA) deemed unlawful, the overall US tariff rate is expected to decline, at least in the near term, reports AFP.According to The Budget Lab at Yale University, doing away with the IEEPA-based tariffs would bring the average effective tariff rate down to 9.1 percent — still the highest level seen since 1946, excluding 2025. Had those emergency-based tariffs remained in place, the rate would have stood at 16.9 percent.Analysts suggest that even if the Trump administration moves to reimpose similar trade barriers under alternative statutes, the resulting tariff levels would probably be lower than those previously enforced.Also Read | Why were Trump tariffs ruled illegal by Supreme Court? Top points from what SC said in its rulingHeather Long, chief economist at Navy Federal Credit Union, said the ruling compels a recalibration of trade policy that could ultimately result in reduced tariff levels and a more structured approach to introducing future duties.Oliver Allen of Pantheon Macroeconomics noted that the tariffs appear to have weighed on Trump’s approval ratings, while voter dissatisfaction over elevated prices continues to be a politically sensitive issue ahead of the November midterm elections.
Hit to Trump government revenues
Economists anticipate the decision will also dent federal revenues. Estimates suggest that tariffs enacted under IEEPA generated between $130 billion and $140 billion by the close of 2025.ING analysts Carsten Brzeski and Julian Geib observed that the issue of potential reimbursements remains unresolved and will be addressed by lower courts in the months ahead.They emphasized that refunds would not be automatic; companies seeking repayment would need to pursue legal action. That process is already underway, with more than 1,000 corporate entities reportedly engaged in litigation.Should the government ultimately be required to return collected duties, it could face an additional fiscal strain.Also Read | Trump tariffs struck down by US Supreme Court: What it means for India – 55% exports to America free from 18% duty
Reduced room to maneuver
A key worry is that Trump may forfeit some of the “flexibility” to deploy tariffs on national security grounds or as bargaining tools in trade talks — a concern previously flagged by US Treasury Secretary Scott Bessent.Even so, he has argued that the administration retains the ability to rely on tariffs as a source of government revenue.Erica York, vice president of federal tax policy at the Tax Foundation, said invalidating tariffs imposed under emergency authority would limit the president’s capacity to introduce sweeping duties at will.However, Wendy Cutler, senior vice president at the Asia Society Policy Institute, suggested that US trading partners are unlikely to abandon recently concluded tariff arrangements. In her view, they understand that withdrawing could ultimately leave them in a weaker position in dealings with the White House.Also Read | ‘US not at war with every nation’: Supreme Court’s sharp put down in ruling against Trump’s illegal tariffs
Alternative routes
Despite the setback, President Donald Trump has other legal mechanisms available to reinstate trade barriers, and analysts anticipate he may pursue them.Section 122 of the Trade Act of 1974 permits the president to respond to balance-of-payments concerns by introducing temporary import duties of up to 15 percent.In addition, Section 338 of the Tariff Act of 1930 authorizes the imposition of tariffs as high as 50 percent on nations deemed to be engaging in discriminatory trade conduct.Another established tool is Section 232 of the Trade Expansion Act of 1962, which has already been used repeatedly to levy sector-specific tariffs that were not affected by Friday’s decision.Likewise, Section 301 of the Trade Act of 1974 — employed during Trump’s first term to target imports from China — remains an option, though it requires a formal investigation process similar to Section 232.Earlier this year, Trump told The New York Times that he could also consider restructuring the tariffs as licensing fees.
