Why the supreme court's tariffs ruling is a win for world trade – but also tricky

• The ruling will reduce tariffs on China from 36.8% to 21.2%, on Brazil from 26.3% to 6.8%, and on Japan from 14.9% to 9.9% on a trade-weighted basis
• The invalidated tariffs collected about $120 billion, or 0.5% of GDP, creating a budget hole that Trump seeks to fill with alternative measures
• Trump responded by invoking Section 122 of the 1974 Trade Act for a new 10% blanket global tariff, though this requires congressional approval to extend beyond 150 days

Summary: Supreme Court Strikes Down Trump's Emergency Tariffs

The U.S. Supreme Court ruled Friday to invalidate tariffs imposed by President Trump under the International Emergency Economic Powers Act (IEEPA), determining the president lacks constitutional authority to levy taxes—a power reserved solely for Congress. The decision specifically targeted tariffs justified by purported "national emergencies" including illegal drugs from Canada, Mexico, and China, trade deficits, and disputes involving Brazil's treatment of Elon Musk's X platform.

Key Data Points:

• Average U.S. trade-weighted tariff will drop from 15.3% to 8.3%
• China-specific tariffs fall from 36.8% to 21.2%
• Brazilian import tariffs decline from 26.3% to 6.8%
• Japanese goods tariffs drop from 14.9% to 9.9%
• Invalidated tariffs collected approximately $120 billion (0.5% of GDP)
• U.S. trade deficit grew 2% in 2025, with imports reaching record $4.33 trillion

Market Implications:

Despite the ruling, Trump immediately announced a new 10% global blanket tariff under Section 122 of the 1974 Trade Act, citing balance-of-payments deficits. However, this provision requires congressional approval to extend beyond 150 days and cannot discriminate among countries, limiting bilateral deal-making.

The decision creates economic uncertainty by upending existing trade agreements and forcing countries to renegotiate terms. While 8.3% represents a significant reduction, it remains historically elevated. Trump retains alternative tariff authorities through Section 301 (unfair trade practices) and Section 232 (national security), though both involve procedural constraints including investigations and consultations.

The ruling provides relief for American consumers and businesses relying on imported components, but leaves Trump's broader trade war architecture largely intact.