As expected, the Supreme Court struck down the bulk of Donald Trump's sweeping “Liberation Day” tariffs as illegal … and almost nothing changed.
Don't get me wrong, last Friday’s 6-3 decision that the International Emergency Economic Powers Act (IEEPA) doesn’t allow the president to impose tariffs at will was a significant defeat for the White House. Rebukes of a sitting president's signature policy are extraordinarily rare in American history. That three conservative justices, two of whom were appointed by Trump himself, were willing to rule against him on the centerpiece of his first year is a genuine demonstration of judicial independence at a moment when many feared the Court would acquiesce.
The economic effect, however, was muted. The ruling briefly cut the US average effective tariff rate from 14.6% to 7.5%. But within hours, Trump had invoked Section 122 of the 1974 Trade Act, slapping a 15% baseline tariff on global imports that will bring the average back up to 13.1% for up to 150 days (though the rate that actually took effect Tuesday was 10%, and trading partners are already lobbying against the remaining increase). The administration simultaneously launched a series of hyperspeed country-specific Section 301 investigations targeting major trading partners. Once these wrap up, likely by mid-year, the tariff wall will settle around 13.5% – just one percentage point below where it was before the Court ruled.
Why bother using IEEPA in the first place when there were other tools to build a similar tariff wall that could hold? Robert Lighthizer, US Trade Representative during Trump’s first term and a protectionist’s protectionist, deliberately didn't use IEEPA to ensure this outcome did not occur. Treasury Secretary Scott Bessent and Lighthizer’s successor, Jamison Greer, echoed his concerns this time around, warning that IEEPA was legally fraught and other tools like Section 301 would take longer but yield a more durable tariff wall. Trump didn’t want to hear it. The result was as predictable as it was avoidable.
So were the effects of the tariffs, which are failing by most measures Trump cared about when he imposed them last year. The US goods trade deficit was the same in 2025 as in 2024, despite a year of the most aggressive tariff regime in modern American history. Manufacturing jobs have declined month after month since Liberation Day as higher intermediate goods prices and policy uncertainty squeezed margins and deterred investment. Every serious study shows that the bulk of the tariff burden has so far fallen on American businesses and consumers rather than on foreign exporters. The one thing the tariffs did do was raise government revenue (they are taxes after all), though at roughly 1% of GDP, it was nowhere near enough to make a meaningful dent in the federal deficit or even to offset the fiscal cost of Trump's tax cuts.
It’s no wonder that most Americans, including over half of non-MAGA Republicans, oppose Trump’s tariffs. The issue is dragging down consumer sentiment and the president’s approval ratings, creating headwinds for the GOP heading into the midterms.
Trump could have easily let the justices take this albatross off his neck. Instead, he spent the weekend calling them “fools and lapdogs” serving foreign interests, vowing to circumvent the ruling, and doubling down on a policy that’s achieved none of its stated goals and will force his party to own a losing issue in an election year.
But the point of IEEPA was never really the tariff wall. It was the unilateral power it conferred on the president.
Under IEEPA, Trump could wake up and impose 50% tariffs on Brazil because its Supreme Court was prosecuting his friend Jair Bolsonaro, with no congressional authorization, no formal investigation, and no bureaucratic process to support a national-interest rationale. He could threaten European allies with levies if they interfered with his Greenland ambitions. He could threaten them against companies whose executives spoke out against him and grant exemptions to businesses that helped build his ballroom. He could function as a kind of economic central planner – moving rates overnight to punish enemies, reward allies, squeeze negotiating partners, and reshape entire industries, all from a single emergency declaration he could invoke and extend without limit.
This is what made IEEPA different from any other tariff tool (or policy tool, for that matter) in American history. In Trump’s hands, it was an instrument of unchecked executive power – a way to entrench the “Rule of Don,” where favor and punishment flow from one man's will rather than law or process.
The alternative tools can rebuild most of the tariff wall, but they can't restore what Trump actually lost with IEEPA. Section 122 is time-limited – up to 150 days without congressional reauthorization – and imposes a uniform global rate that leaves no room for country-specific punishment or selective exemptions. Section 301 allows both, but it requires formal fact-finding inquiries that take months and give businesses and trading partners grounds to challenge legal justifications in court. Neither lets Trump move tariff rates overnight or use tariffs as selective leverage in unrelated foreign policy or personal disputes.
The biggest immediate winners from the ruling are China and Brazil, which faced the highest tariffs before and saw their effective rates drop 7 and 9 percentage points respectively, before Trump scrambled to restore them. Xi Jinping knows Trump's remaining tools are slower and more constrained, and he’ll negotiate accordingly when Trump arrives in Beijing in April. A US-Brazil deal that was already likely but had stalled over Washington's insistence on keeping the 40% bespoke tariff as leverage just got easier to reach, though on terms less favorable to the US.
Meanwhile, the countries that spent months playing ball with Washington are having a rethink. The United Kingdom and Australia don't know whether the 15% Section 122 baseline rate will override the 10% they thought they'd secured in their deals. The European Union, Japan, South Korea, and Switzerland worry that Section 122 will stack on top of existing sectoral tariffs, potentially breaching caps in their agreements with the US. The European Parliament has already paused ratification of the EU-US Turnberry agreement pending clarity on where US tariffs actually land. Even countries that faced the minimum 10% reciprocal rate under IEEPA – Singapore, Colombia, Saudi Arabia, Chile – may soon be worse off than before.
Then there’s the refund question. The Court was silent on whether the administration must return the $175 billion-plus already collected from American businesses under an authority now deemed illegal, opening the door for lengthy case-by-case litigation that will keep “illegal taxes” in the headlines through the midterms. Disbursing refunds would blow a hole in the projected deficit; withholding them hands Democrats an easy attack line. Either way, don't expect retail prices to fall; companies that raised them on the way up have little incentive to cut them on the way down.
This setback is the latest illustration of a pattern that keeps repeating: Trump's impatience and policy incompetence undermining his own political revolution – Eurasia Group’s top risk for 2026 and one we've long argued is likely to fail precisely for this reason. He could have built a more durable tariff architecture from day one. He chose the fastest path to maximum power and headline impact instead.
Don’t expect Trump to moderate in response to defeat. Constraints change how he pursues power, but they don't change whether he does. As we wrote in Top Risk #6, State capitalism with American characteristics, losing tariff flexibility will redirect, not stop, his economic interventionism. Equity stakes and revenue-sharing arrangements will spread, regulatory leverage will sharpen, and economic sanctions will increasingly substitute for the country-specific tariff leverage he's lost. The more frustrated and constrained he is on the economic front, the more tempted he will be to escalate on the security front, where American power is more asymmetric and institutional checks on the presidency are weaker.
The Supreme Court ruling is good news for American democracy. But let’s be clear about what an independent judiciary can and cannot do. It can impose constraints, force deliberation, and make arbitrary power harder to wield. It can’t impose outcomes. Whether that’s enough to contain a president who is growing more risk-acceptant by the day, surrounded by loyalists who cannot afford to lose, with three more years on the clock – that remains to be seen.
