How the US Supreme Court ruling reshapes US trade policy (Image: X)
The US Supreme Court’s decision in Learning Resources v Trump is formally a statutory holding about International Emergency Economic Powers Act (IEEPA). In effect, it is a ruling about the architecture of bargaining power. Chief Justice Roberts frames the claim quite clearly. The President asserted “the independent power to impose tariffs on imports from any country, of any product, at any rate, for any amount of time.” The Court’s answer is that IEEPA cannot bear that weight. Tariffs are “a branch of the taxing power,” the President has “no inherent authority to impose tariffs during peacetime,” and Congress does not delegate the power to tax through vague verbs like “regulate.” The result is not the end of American tariff politics, but the end of a specific operating system that made the past year’s trade diplomacy unusually coercive: rapid, sweeping, and discretionary “reciprocal” tariffs imposed under emergency authority.
Trump’s response has been to move immediately to a replacement stack. He invoked Section 122 of the Trade Act of 1974 to impose a 10% global duty for 150 days, tightened the border by reaffirming the suspension of de minimis duty free treatment for low value shipments, and directed USTR to initiate Section 301 investigations into “unreasonable and discriminatory” practices. Each of these tools is real, but each is materially different from IEEPA. Section 122 is time limited. Section 301 requires a record, findings, and process. None delivers the same combination of speed, breadth, and unilateral optionality that powered the reciprocal tariff regime. The Court’s insistence on “clear congressional authorization” therefore changes the production function of US coercion. The United States can still escalate, but escalation becomes slower, more segmented, and more litigable.
That brings the analysis to the question that matters most for global trade: what happens to the reciprocal tariff regime and to the deals signed under its shadow?
The reciprocal tariffs were an enforcement technology for extracting concessions from countries that were, in many cases, trading away more than the United States. The deal logic was asymmetrical by design. Access to the US market is the binding constraint for many exporters because of scale, depth of demand, and the signalling value of US entry for other markets. The reciprocal tariffs weaponised that constraint. The credible threat was not only higher tariffs, but the ability to impose them quickly, across many products, and to revise them repeatedly. That created a high uncertainty cost for firms and governments. In that environment, the rational response for many countries was to pay an insurance premium in the form of concessions. Those concessions often took the form of accelerated market opening, standards alignment, procurement commitments, or investment pledges, while the US side reserved the option to modulate tariffs.
The Supreme Court has now removed the legal foundation of that particular threat. The question is whether the underlying bargains unravel.
From first principles, the answer depends on whether the deals were primarily about tariff levels, or primarily about stability. If the deals were simply transactional exchanges of tariff relief for concessions, the legal weakening of the tariff threat should, in theory, strengthen counterparties and make renegotiation attractive. If the deals were primarily an insurance contract against US volatility, then counterparties may prefer to keep them even if the underlying tariff authority is impaired, because the alternative is renewed uncertainty under different statutes.
There is also a second first principles constraint: the United States still controls the border. Even without IEEPA, it retains multiple statutory avenues to raise trade costs. Section 301 and Section 232 are slower, but they can be rebuilt into a large wall, brick by brick. Section 122 provides a temporary global surcharge. Section 338 is a latent threat in the background. The Supreme Court has not eliminated American power over market access; it has redistributed it across instruments with more process and more limits. This matters because the relevant variable for a trading partner is not the abstract legality of IEEPA, but the expected path of US trade restrictions over the next one to three years. If that expected path remains restrictive, counterparties may treat the Court decision as a procedural speed bump rather than a strategic reversal.
So, will countries be bolstered? They will be bolstered at the margin, and in a specific way. The ruling does not give them a better US trade policy. It gives them a better negotiating position on durability, process, and symmetry. The US can no longer credibly claim it can instantly reimpose a comprehensive reciprocal tariff architecture with the same legal ease. That shifts bargaining from unilateral threats to administrative and legislative pathways, where counterparties can demand more explicit commitments and more predictable triggers. Countries that are still negotiating deals will have more room to insist on contractual safeguards. Countries that have already signed deals will have a choice set shaped by incentives and risks.
The strategic options before countries can be distilled into three. First, hold the deal as a stability asset. Even without IEEPA, the United States retains other statutory tools to impose trade restrictions. Remaining within an agreement may reduce tariff variance, deter targeted investigations, and preserve investor confidence. This approach is rational only if the deal provides tangible insulation, such as exclusions, quotas, or structured consultation mechanisms. If it merely removed an unlawful threat without stabilising expectations, its value is limited. Second, pursue constrained renegotiation focused on legal durability rather than new concessions. The Court’s ruling strengthens the case for rebalancing authority risk. The objective should be technical repair: tariff change and rebalancing clauses, stability windows during temporary measures, and procedural safeguards for future Section 301 or 232 actions. The aim is not to eliminate tariff risk but to make escalation predictable. Third, exit. This is the most confrontational option and is rarely optimal. Withdrawal restores exposure to a US trade regime that remains protectionist and potentially more targeted. Concentrated investigations can be more damaging than broad tariffs.
The decision rule is quite simple. Countries should compare the value of stability under the current deal with the expected gains from renegotiation minus the risk of retaliation. For most countries, the optimal response is constrained renegotiation that preserves core access while explicitly reallocating tariff risk. The ruling narrows executive authority, but it does not remove US leverage.
Aditya Sinha writes on macroeconomics and geopolitics.
