Supreme Court ruling throws Trump administration's tariff strategy into flux. What it means for global trade, U.S. economy

• Trump is now using Section 122 of the Tariff Act (limited to 150 days) along with Sections 232 and 301 to maintain tariffs, creating ongoing uncertainty through mid-year and potentially beyond
• Countries are diverting trade to China, which saw exports spike 8% in December 2025 year-over-year, pushing its annual trade surplus to a record
• Economists predict businesses will invest and hire less while foreign governments pull away from U.S. trade, with Moody's chief economist calling it 'nothing but downside' for the economy

Supreme Court Tariff Ruling Disrupts Trump Trade Strategy

The Supreme Court struck down President Trump's sweeping tariffs imposed in April 2025 under the International Emergency Economic Powers Act (IEEPA) in a 6-3 decision on Friday. Trump immediately reimposed tariffs using alternative legal authorities, escalating global trade tensions.

Key Developments:

• Trump now invokes Section 122 of the Tariff Act for new tariffs, though these are limited to 150 days (through mid-July) without Congressional approval
• Administration plans to supplement with Sections 232 and 301, enabling continued tariff implementation for years
• EU postponed voting on its U.S. trade deal Monday, citing frustration over erratic U.S. trade policies

Market Implications:

The uncertainty is driving businesses and foreign governments toward more cautious stances on investments, expansion, and hiring involving U.S. trade. Mark Zandi of Moody's Analytics warns of "nothing but downside" for the U.S. economy as perceptions grow that America is "a poorly managed economy."

China Benefits:

Chinese exports surged in December (year-over-year in USD terms), exceeding analyst expectations and pushing annual trade surplus to record levels. Imports grew at their fastest pace in three months as countries divert trade away from the U.S.

Diverging Views:

While economists like Zandi and RBC's Mike Reid warn of significant economic consequences, Citigroup's Veronica Clark suggests minimal near-term impact, noting a 15% Section 122 tariff keeps effective rates essentially unchanged, lowering them by approximately 1 percentage point.

The overall trend points toward deglobalization, with mutual U.S.-global trade pullback creating long-term economic headwinds.