US Dollar Swings as Markets Weigh Tariff Policies

- The Supreme Court's 6-3 ruling on February 20, 2026, invalidated tariffs imposed under the International Emergency Economic Powers Act (IEEPA), stating the act does not grant the president the authority to levy tariffs. This decision affects a wide range of tariffs, including the "reciprocal" tariffs and those related to fentanyl, which were a cornerstone of the administration's trade strategy. - In response to the court's decision, the administration announced new temporary tariffs under Section 122 of the Trade Act of 1974, initially set at 10% and later raised to 15%. This law allows the president to implement temporary import surcharges for up to 150 days to address a balance of payments deficit without needing congressional approval. - The White House has also signaled its intent to launch new investigations under Section 301 of the Trade Act of 1974. These investigations will reportedly target a broad range of practices from major trading partners, including pharmaceutical pricing, digital services taxes, and industrial excess capacity, and could lead to more long-term tariffs. - The European Union has formally objected to the new tariffs, with the European Commission stating that "a deal is a deal" and demanding the U.S. adhere to the terms of a previous trade agreement. EU officials have warned that the unpredictable tariff situation undermines confidence and could disrupt transatlantic trade. - China's Ministry of Commerce has urged the U.S. to cancel the unilateral tariffs, stating they violate international trade rules. Beijing has indicated it is assessing the impact of the Supreme Court's ruling and will monitor future U.S. actions to "firmly safeguard its legitimate rights and interests." - The U.S. auto industry, which relies on global supply chains, faces significant disruption. The new tariffs, on top of existing duties on steel and aluminum, are expected to increase costs for both imported vehicles and U.S.-built cars with foreign components, potentially leading to higher consumer prices. - While the Supreme Court's ruling struck down the IEEPA-based tariffs, it does not affect duties imposed under other authorities, such as the Section 232 tariffs on steel and aluminum. This legal distinction means that a complex web of tariffs remains in place even as new ones are being introduced.