The United States Supreme Court’s ruling, which declared Donald Trump’s sweeping tariffs unlawful, has injected uncertainty into global trade yet again, as the US president imposed a new 15 percent tariff on Saturday.
Weeks after his inauguration in January 2025, Trump imposed tariffs against foes and allies using the International Emergency Economic Powers Act (IEEPA), unleashing a trade war that rattled global trade.
But on Friday, in a 6-3 decision, the top court agreed that Trump exceeded his authority by invoking the 1977 law, which was designed to allow US presidents to respond to specific national emergencies. The court said tariffs are a form of taxation, and under Article I of the Constitution, the power to tax belongs exclusively to Congress.
The court’s ruling, however, does not apply to Trump’s tariffs on steel, aluminium, lumber and automotives since these were imposed under a different law – Section 232 of the Trade Expansion Act of 1962.
Following the verdict, a furious Trump called the Supreme Court judges “fools and lapdogs” who are “very unpatriotic and disloyal to our Constitution”. He immediately signed an executive order under Section 122 of the US Trade Act of 1974 to impose a blanket 10 percent tariff on all countries the US trades with, starting on February 24. On Saturday, he raised the tariff to 15 percent, the highest rate allowed under this trade law.
So, what is this new trade law that Trump has used to impose tariffs? What does this mean for trade deals the US has already signed with countries around the world?
Here’s what we know:
What is the new trade law Trump is using?
Under US law, Section 122 of the US Trade Act of 1974 empowers the president to impose tariffs of up to 15 percent to address “large and serious balance-of-payments deficits”.
Tariffs can be imposed under this law only for 150 days unless the US Congress agrees to extend it. Trump is the first president to use this law to impose tariffs.
In a statement on Friday, the White House said some goods, such as certain agricultural products like beef, tomatoes, natural resources and fertilisers that cannot be grown or produced in the US, aerospace products, among others, will not be subject to the temporary levy.
Shantanu Singh, an international trade lawyer, noted that since this is the first time this legal authority has been used by any US president, it could likely be litigated.
“But the government has considerable leeway to determine this as trade deficits can form part of balance-of-payments deficits,” he told Al Jazeera. Trump has justified the tariffs as a way to balance the US’s trade deficits of more than $900bn.
What happens to the trade deals?
Several countries had signed trade deals to cushion themselves from Trump’s punishing tariffs last year. The United Kingdom, India and the European Union, among others, had entered into deals to lower tariffs on their exports to the US.
But the ongoing tariff spectacle has thrown the future of those trade deals into doubt. Will they be charged the new 15 percent tariff or the agreed rate signed in the trade deals? Will India be tariffed at 18 percent, as per the trade deal, or 15 percent as announced by Trump on Saturday?
Speaking to reporters on Friday, Trump said some of these trade agreements will stand.
“The trade deals, because they are international, will likely remain in place,” Singh, the international trade lawyer, said.
However, after the Supreme Court’s ruling, he said, the big incentive for doing trade deals with the Trump administration, which was to get a lower reciprocal tariff rate before competitors, has vanished.
“That reduces the incentive for trade partners to comply with their part of the deal for the time being,” he said.
Here is a look at some of the trade agreements and what their future looks like.
United Kingdom
The UK was one of the first to sign a trade deal with the US last May after being hit by 5 percent tariffs on steel and aluminium exports, as well as a 25 percent tariff on cars and auto parts.
Under their agreement, the US agreed that there would be zero tariffs on steel and aluminium imports from the UK, and for other goods, it was set at 10 percent. Last December, the two nations also agreed to zero tariffs on pharmaceuticals and medical products.
After Friday’s Supreme Court ruling, William Bain, head of trade policy at the British Chamber of Commerce, said in a statement that the ruling does “little to clear the murky waters for business”.
On Friday, a spokesperson told the media that the British government was “working with the US” to understand more about how the court’s ruling will affect the UK.
The court ruling will not impact the UK’s deal on steel, aluminium and pharmaceutical exports.
But Bain said the new 15 percent global tariff rate, which has been imposed under Section 122 of the Trade Act 1974, “will be bad for trade, bad for US consumers and businesses and weaken global economic growth”.
China
Trump had imposed one of the highest tariffs on China, and the world’s two largest economies were engaged in a trade war. At one point, they had slapped reciprocal tariffs exceeding 100 percent on some goods.
The two countries have yet to sign a trade deal, but they agreed to lower the tariffs as part of a trade truce.
After several rounds of trade talks and a summit between Trump and Chinese President Xi Jinping in South Korea in October, the two countries agreed to a one-year truce with a 10 percent baseline tariff. Trump also slashed the so-called fentanyl tariff to 10 percent.
The Supreme Court ruling will lift tariffs imposed on chemicals used in fentanyl. However, tariffs on other Chinese exports, such as electric vehicles, aluminium and steel, will remain.
Following the court’s ruling, Chinese Embassy spokesperson in the US, Liu Pengyu, told journalists that tariffs and trade wars serve neither the US nor China’s interests. He called on Beijing and Washington to work together to “provide greater certainty and stability for China-US economic and trade cooperation and the global economy”.
Trump is scheduled to travel to China from March 31 to April 2 to meet Xi and discuss trade.
But Singh, the trade lawyer, said countries like China that did not negotiate deals with the US are quite well placed because, as a result of the court’s ruling and repeal of the reciprocal tariffs, they have achieved a lower rate of tariff without having to make concessions.
“China will definitely feel it has the upper hand going into negotiations with the US,” he said.
South East Asia
Last year, South East Asian countries Indonesia, Malaysia, Vietnam and Cambodia entered into trade agreements with the Trump administration to lower tariffs.
Malaysia reduced its tariff from 25 percent to 19 percent, while Cambodia’s tariff dropped from 49 percent to 19 percent after their respective trade agreements with the US last year. Vietnam and Indonesia also signed deals, reducing their tariffs to 20 percent and 19 percent, respectively.
After the Supreme Court’s decision, Trump’s trade representative, Jamieson Greer, told Fox News that US imports from countries such as Malaysia and Cambodia would continue to be taxed at their negotiated rates of 19 percent, even though the universal rate was fixed at 15 percent on Saturday.
Indonesia’s chief negotiator for US tariffs, Airlangga Hartarto, also said the trade deal between the countries that set US tariffs at 19 percent remains in force despite the court decision.
India
At 50 percent, India faced among the highest US tariffs. The US first imposed a 25 percent levy on Indian imports and later added another 25 percent citing the country’s purchases of Russian oil as the reason.
Earlier this month, the US and India reached a framework trade deal. Trump said Prime Minister Narendra Modi agreed to stop buying Russian oil and that US tariffs would be lowered to 18 percent for India’s top exports to the US, including clothing, pharmaceuticals, precious stones, and textiles. India said it will eliminate or reduce tariffs on all US industrial goods and a range of agricultural products.
An Indian trade delegation, which was scheduled to travel to the US to finalise details of the trade agreement, has been postponed.
European Union
Last July, the EU and the US struck a deal to avert a transatlantic trade war after Trump imposed a 30 percent tariff on imports from the 27-member bloc. Under the agreement, EU exports to the US would face a 15 percent tariff.
The deal, however, had not yet come into effect since EU lawmakers paused its ratification after Trump threatened to annex Greenland, an autonomous territory of Denmark, last month.
The European Parliament’s trade committee is set to vote on the EU’s trade deal with the US on February 24, but the Supreme Court’s ruling and Trump’s new tariffs have made the future of the deal uncertain.
An EU commission spokesperson told journalists after the court’s ruling that the bloc is in “close contact” with the US administration to seek more clarity.
Mexico
Mexico was one of the first countries to be targeted by Trump’s tariffs last year. It was hit by a 25 percent tariff on some pharmaceuticals, and an additional 25 percent “fentanyl tariff” over what Trump said is the flow of drugs across the Mexican border into the US.
Approximately 85 percent of Mexican exports to the US were exempt from tariffs because of the US-Mexico-Canada Agreement (USMCA), which came into force in July 2020.
The Supreme Court ruling will reduce the tariffs on Mexico’s exports.
However, the USMCA is set to be reviewed again later this year, and it is uncertain whether products exempt from US tariffs under it will face levies if the agreement lapses.
Mexico’s Economy Minister Marcelo Ebrard has said he will travel to the US in the near future to discuss the issue.
Canada
Canada faces 35 percent tariffs on goods from certain sectors, like steel and aluminium, and most of its goods have also been impacted by a 50 percent levy on imported metals and a 25 percent duty on non-US cars.
Most of its goods are exempt under the existing USMCA.
Following the court verdict, Canada-US Trade Minister Dominic LeBlanc told journalists that significant work remains as Washington-imposed tariffs on steel, aluminium, softwood lumber and automobiles remain in place.
Moreover, with the USMCA review coming up later this year, some Canadian leaders are also worried about what Trump could do next.
What happens next?
Countries are waiting to hear how exactly the top court’s ruling and Trump’s new tariffs will play out.
Singh, the trade lawyer, said the US administration will likely use the 150-day period during which the 15 percent Section 122 global tariffs will be effective.
“During this period, the United States trade representative will swiftly conduct investigations under another legal authority – Section 301 – to make findings on unfair trade practices of its trade partners and try to reinstate the reciprocal tariff rates which were invalidated,” he said.
“The trade deals could then be adjusted to reflect this new reality.”
