Scowcroft Group Snapshot: What the IEEPA Ruling Means for US Allies

By Jennifer Lee and Filipa Jorge

February 25, 2026

If the Feb. 20 Supreme Court (SCOTUS) decision striking down President Trump’s use of the International Emergency Economic Powers Act (IEEPA) to apply tariffs brought relief to US allies, it was likely a fleeting feeling. The decision confirms congressional authority over imposing tariffs and prevents Trump from imposing tariffs at will. But for key US partners, it adds confusion rather than improves their outlook for trade with the US.

*Trade uncertainty increases *

The administration’s immediate response to the SCOTUS ruling was to announce 10% global tariffs under Sec. 122 authority (which Trump increased to 15% on Feb. 21). Not only is the Sec. 122 tariff time-bound to 150 days before Congress needs to reauthorize it, but the rate that actually came into effect Feb. 24 was 10%, not 15%. Countries that secured or are close to securing a trade “agreement” with Washington are left wondering whether the deals stand or if the Sec. 122 tariff supersedes them.

The agreements are nonbinding and often vague to begin with, and the changes to the tariffs have driven some allies – particularly those with some leverage in the relationship – to delay further action on the deals until they receive enough clarity and assurances from Washington. European Parliament negotiators once again paused the ratification process and are set to meet March 4th to evaluate the situation. Meanwhile, India’s trade delegation postponed its planned visit to Washington this week that was meant to finalize a US-India trade deal.

*Tariffs are here to stay *

Although the IEEPA tariffs are nullified, the Trump administration possesses several tools to use tariffs to exert pressure on trade partners. The removal of the IEEPA tariffs dropped the average effective tariff rate from 16% to about 9%. But the near-immediate implementation of Sec. 122 tariffs increased the rate to around 13% – still much higher than historical averages over the past few decades. Quickly applying the Sec. 122 tariffs buys time for Team Trump to put together additional Sec. 232 and Sec. 301 investigations to cover more areas. These measures have already been employed by Trump over both of his administrations, but they require legal justification and could also be contested in court.

*Trade diversification will continue *

Because of the heighted uncertainty and other instruments at the disposal of the president, the ruling is unlikely to mitigate ongoing efforts by U.S. partners to diversify their ties away from the United States. Canadian Prime Minister Mark Carney, for example, is soon meeting his counterparts in India, Australia, and Japan (all Quad members alongside the U.S.). These talks will focus heavily on trade agreements and security cooperation.

The SCOTUS ruling restrains Trump from imposing tariffs at will and brazenly conflating trade with other issues (recall the 50% tariff against Brazil in response to his ally Bolsonaro’s trial), but it may heighten trade uncertainty instead of mitigating the administration’s protectionist instincts.

The fact that the ruling also does not specify reimbursement of the tariffs collected opens the door for more confrontations in court and perhaps motivates countries to strike a deal that leaves them out of the crosshairs of other trade instruments that may be deployed.

Jennifer Lee is a Senior Associate at The Scowcroft Group, where she provides analysis to corporate clients and financial institutions covering East Asia, Latin America, resources and the energy transition, as well as export controls.

Policy Contributing Writer Filipa

Jorge

is a principal at The Scowcroft Group, where she provides strategic risk advisory services on issues including Latin America, Europe, and BRICS+.The Scowcroft Group is a Washington, D.C.-based international business advisory firm founded by the late Brent Scowcroft, former National Security Advisor to Presidents George H.W. Bush and Gerald Ford. Its principals generously provide Policy’s regular Letter from Washington and Scowcroft Group Snapshot posts.