SCOTUS vs. Trump's 'Tariff Diplomacy' - Valdai Club

Ekaterina Arapova* discusses President Trump’s clash with the US Supreme Court over the nature of emergency economic powers—exploring the legal ins and outs of tariff enforcement, assessing the consequences for both partners and adversaries, and pondering the issue of revenues already collected from the tariffs now deemed illegal.*

On February 20, the United States Supreme Court ruled that the tariffs introduced by Donald Trump under the federal International Emergency Economic Powers Act (IEEPA) were illegitimate. The Act is intended for use in emergency situations but does not authorise the President to impose tariffs without the approval of the US Congress. In essence, the Supreme Court’s ruling marked a significant restoration of the balance of authority between the executive and legislative branches in trade policy. The Court effectively confirmed that—even under a broad interpretation of presidential powers to declare an economic emergency—such powers cannot replace the constitutional role of Congress in imposing tariffs. The ruling is highly significant and symbolic—many experts view it as a domestic political victory for the opponents of the incumbent President. At the same time, the specific features of the ruling, the principles of its implementation, and its global political consequences still require careful examination.

Nevertheless, the Supreme Court’s decision by no means indicates that Mr Trump is prepared to abandon his policy of trade wars and the large-scale coercion of “partners” into concluding trade agreements advantageous to the United States. Sectoral tariffs on steel, aluminium, timber, and automobiles remain in force. These were introduced under Section 232 of the Trade Expansion Act of 1962, precisely on the grounds of national security. Moreover, Donald Trump confirmed his readiness to maintain the same course by almost immediately activating what may be described as a backup plan after the Court’s ruling was announced. He announced the introduction of temporary tariffs under the Trade Act of 1974; the suspension, from February 24, of the tariffs declared illegitimate was replaced by the introduction of a new global tariff of 10%. In other words, the legal basis has changed, while the mechanism and political will have remained the same.

However, it would be mistaken to assume that a change in form leaves the substance unaltered. There is an important nuance. First, under the 1974 Act, the President—who has been delegated a measure of Congressional authority—may introduce only temporary tariffs by means of executive orders, for a period of 150 days. To maintain them in force for a longer period, a congressional decision is required. Second, Section 122 of the Act establishes a ceiling of 15% on tariffs introduced by the President (for the purpose of addressing serious problems in the United States balance of payments). Accordingly, under this legal framework, the familiar scenario of uncontrolled tariff increases and trade wars that unfolded last year will be considerably more difficult to reproduce. Third, it remains unclear on what legal grounds Donald Trump intends to introduce politically motivated secondary tariffs—such as the 25% tariff imposed on India for purchases of Russian oil or for cooperation with Iran—given that the category of “secondary tariffs” is not legally codified in any formal document, largely due to the novelty and uniqueness of this precedent.

America’s partners are well aware of these newly emerged constraints. As a result, they now have the opportunity to avoid rushing into concluding trade agreements or ratifying previously signed deals, and instead could wait until it becomes clearer what the likelihood and legal basis are for further pressure from the United States.

In 2025–2026, amid tariff escalation, the Trump administration concluded a number of bilateral trade agreements, largely in the format of reciprocal tariff concessions and expanded market access. Agreements were signed—in particular, with the European Union, Japan, Cambodia, Indonesia, Malaysia, the Philippines, Bangladesh, Argentina, El Salvador, and South Korea, as well as several narrower trade and investment arrangements. At the moment the United States Supreme Court issued its ruling, a number of countries were still engaged in negotiations on the content of trade agreements—including India, Vietnam, Brazil, Thailand, and others. For many of them, the reduction of tariff barriers and the removal of high duties provided clear advantages. As a result of the Court’s ruling, the principal beneficiaries of the reduction in tariff pressure have been countries with large export volumes to the United States, which now face significantly lower duties. China, India, and Brazil are predictably among the largest beneficiaries, as their goods had previously been subject to high tariffs. Exporters from Bangladesh, Indonesia, Vietnam, Turkey, and other countries have also reaped benefits—the European Union has likewise received a certain degree of relief.

Partners reacted swiftly. The lack of clarity on tariffs prompted India to slow down discussions on its trade agreement; a delegation’s visit to Washington that was intended to finalise the deal was postponed. At the same time, the European Parliament suspended the ratification of its trade agreement with the United States and postponed further work on it, while China officially called on the United States to abolish unilateral tariffs following the Supreme Court’s ruling and is closely monitoring the future direction of Washington’s trade policy. In other words, partners appear inclined to pause and wait for further developments, as they now possess greater room for manoeuvre in negotiations with Washington. They are also unlikely to hurry in complying with American demands under previously imposed secondary tariffs. The ruling of the US court weakened Trump’s position in the “trade war” with India, which has de facto given New Delhi greater freedom to continue energy cooperation with Russia without an immediate threat of prohibitive duties.

Another acute—and highly provocative—issue concerns the status of customs revenues that had previously accrued to the US Treasury. According to various estimates, between 130 and 175 billion dollars were collected from participants in foreign trade transactions—funds that, as has now emerged, were obtained unlawfully. The Supreme Court’s decision creates legal grounds and mechanisms for challenging the tariffs collected prior to the ruling. Previously, in anticipation of the Supreme Court’s verdict, United States trade courts had suspended consideration of hundreds of tariff-related lawsuits that had already been filed. These proceedings will now be resumed. Compensation for incurred losses has already been demanded by the United States Chamber of Commerce (USCC) and the National Retail Federation (NRF). At the same time, on 2 March the Federal Court of Appeals rejected a request by the Trump administration to postpone proceedings concerning the refund of tariffs to importers, while the attorneys general of twenty US states have challenged the introduction of the new 10% global tariff. It is evident that in the near future this process will become even larger in scale, while the domestic political blow to Trump’s reputation following the Supreme Court’s ruling will produce a long and painful aftertaste—one that his political opponents will likely continue to exploit for a considerable period. Moreover, the ruling also affects international legal legitimacy and may strengthen the position of countries that had previously challenged American tariffs in international trade disputes.