<\/p>\n
In their six-three majority ruling, the judges held<\/a>\u00a0that US president Donald Trump cannot rely on the\u00a0International Emergency Economic Powers Act (IEEPA)\u00a0to unilaterally impose tariffs on US imports. The court said that the tariff measures in question required Congress approval.\u00a0The ruling means tariffs Trump has imposed in this way since the so-called \u201cliberation day\u201d last April are unlawful under the US Constitution.<\/p>\n Over the weekend, Trump criticised the judgment and doubled down on his tariff policy, which he insists is necessary to address the US\u2019 trade deficit.<\/p>\n Relying on section 122 of the Trade Act 1974, the US president, in the aftermath of the ruling on Friday, announced that a 10% blanket tariff would be applied to US imports from around the world, from Tuesday 24 February 2026, albeit certain goods \u2013 including pharmaceutical products, critical minerals and vehicles \u2013 would be exempt on national interest grounds. Two days later he indicated that the surcharge would in fact be raised to 15%, the maximum rate that may be applied under Trade Act powers. However, the new tariffs have now taken effect at the 10% rate.<\/p>\n There are winners and losers from the disapplication of the IEEPA tariffs. Imports from countries like Brazil, China and India will now be cheaper than prior to the Supreme Court\u2019s ruling. At the same time, the position in relation to some of the countries with which the US struck framework deals following the imposition of the IEEPA tariffs last spring<\/a>\u00a0is less clear. For example, certain reports<\/a> suggest that the new US tariff policy would mean a 2.1% increase in the average tariff rate applicable to most UK goods and an overall increase of 0.8% for the EU.<\/p>\n While the UK government has, so far, remained generally circumspect in its response<\/a>, EU policymakers have insisted that the US must stick to the terms of the deal they struck last August. As the European Commission has put it<\/a>, the new US tariffs must not go \u201cbeyond the clear and all-inclusive ceiling\u201d that the two sides negotiated. For its part, the European Parliament has now announced that it will delay the ratification of the deal with the US\u00a0until there is \u201cfull clarity\u201d on how the Supreme Court\u2019s ruling affects the tariff arrangement.<\/p>\n The latest US tariff policy is temporary by legal necessity. The tariffs that are being introduced under s122 of the Trade Act 1974 can only remain in place for 150 days. At the same time, the US administration has made it clear that it would be looking into alternative legal means of pursuing tariff hikes, including by initiating new trade investigations under s301 of the Trade Act 1974 and s232 of the Trade Expansion Act 1962. However, such investigations can only be much more focused in scope, which would make it more difficult to pursue expansive tariff hike policies.<\/p>\n Ultimately, this is just the latest twist in the US tariff policy rollercoaster which seems to have upended the global rules-based trading system and created uncertainty for businesses trading with the US. The practical effect of this state of affairs seems to be an increase in the desire of trade partners to limit exposure to the US where possible and find new export markets.\u00a0<\/p>\n Even before Friday\u2019s ruling, there was evidence of this shift with the free tree agreement put in place between the EU and India,<\/a>\u00a0the separate sector-specific deal Canada has struck with China, and a new urgency in efforts to finalise an EU-Australia free trade agreement. Separately, it has been reported that Canada is spearheading an initiative<\/a> that will \u201cbuild a bridge\u201d between the EU and the Trans-Pacific Partnership, which would create a combined market of 1.5 billion people, in response to the continued uncertainty over US tariffs.\u00a0 \u00a0\u00a0<\/p>\n A White House statement issued at the weekend makes it clear that the US administration tariff policy aims at stemming the outflow of dollars to foreign producers and incentivising the return of domestic production. This claim is not uncontroversial with concerns already having been expressed that the US tariff policy ultimately penalises US importers with higher costs, US consumers with higher prices, and leads to an increase in inflationary pressures in the US economy. Similarly, there are concerns over the policy\u2019s broad-brush approach in that it does not seek to differentiate between critical strategic industries in relation to which there might be national security imperatives for building alternative domestic infrastructure and supply chains and the manufacturing of less strategically important goods which can be made more cheaply and efficiently elsewhere.<\/p>\n Ultimately, the choices for businesses have not changed: first, they need to pay particular attention in the drafting of supply chain contracts so as to ensure that these incorporate appropriate powers for termination or renegotiation in the event that further changes to US tariff policy makes that necessary or desirable.\u00a0 Supply contracts should also capture adequately who bears the risks in the event of yet further changes to US tariffs. Major multinationals might also have the option of building greater capacity in the US, as president Trump has demanded, to avoid being penalised. For many businesses this choice might not be available, so limiting US exposure and seeking to diversify export markets might be the main outcome of the continued uncertainty over US tariffs.<\/p>\n","protected":false},"excerpt":{"rendered":"
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