China Wins Big in US Tariff Ruling

The Supreme Court's decision invalidated tariffs imposed under the International Emergency Economic Powers Act of 1977 (IEEPA), a law the Trump administration had used to justify broad duties on goods from China and other countries by declaring a national emergency. This ruling affects a significant portion of the tariffs enacted since early 2025, including the so-called "fentanyl tariffs" and "reciprocal" tariffs. The invalidated tariffs had at one point escalated the effective U.S. tariff rate on Chinese goods to as high as 145%. The Supreme Court found that the IEEPA does not grant the president the authority to impose tariffs, a power the Constitution reserves for Congress. As a result of the ruling, importers may be eligible for an estimated $175 billion in refunds for the duties paid under this now-voided legal authority. This ruling does not, however, affect the substantial tariffs imposed on approximately $360 billion worth of Chinese goods under Section 301 of the Trade Act of 1974 during the first Trump administration. Those tariffs were justified by investigations into China's trade practices concerning intellectual property and technology transfer and remain in place. In response to the Supreme Court's decision, the administration has already invoked Section 122 of the Trade Act of 1974 to impose a new temporary global tariff. This authority allows for a surcharge of up to 15% for a maximum of 150 days to address balance-of-payment issues. Looking ahead, the administration is reportedly preparing to use other legal avenues to continue its tariff strategy. This includes initiating new investigations under Section 301, which allows for tariffs to combat unfair trade practices, and utilizing Section 232 of the Trade Expansion Act of 1962 for tariffs on goods deemed a threat to national security. The U.S.-China trade war officially began on July 6, 2018, when the U.S. imposed a 25% tariff on $34 billion of Chinese imports, targeting products related to China's "Made in China 2025" industrial strategy. This action followed a Section 301 investigation launched in 2017. Throughout 2018 and 2019, both countries engaged in a tit-for-tat escalation, with the U.S. eventually imposing tariffs on hundreds of billions of dollars worth of Chinese goods and China retaliating with duties on U.S. products. A "Phase One" trade deal was signed in January 2020, but many of the underlying tariffs remained in effect. The recent Supreme Court ruling marks a significant development in this ongoing economic conflict, shifting the legal landscape for the administration's use of tariffs as a key policy tool. The administration's swift move to an alternative legal basis signals a continued commitment to its tariff-focused trade policy.