By Andrea Shalal
WASHINGTON, Feb 22 (Reuters) – The U.S. Supreme Court’s decision to strike down a large swath of President Donald Trump’s tariffs has weakened his ability to threaten and impose tariffs at a moment’s notice, but it won’t end gnawing uncertainty for trade partners or companies.
Trump responded within hours to the ruling on Friday, slapping a new 10% tariff on all imports and ordering new trade investigations that could lead to additional levies in months, while insisting that trade and investment deals reached with nearly 20 countries – most with higher tariffs – should remain untouched.
Less than 24 hours later, he raised the rate of the new tariff to 15% – the maximum level allowed under the law.
Wendy Cutler, a former U.S. trade official and senior vice president at the Asia Society Policy Institute, said Trump’s rapid-fire change was emblematic of the president’s desire – and ability – to keep trading partners on their toes.
“The uncertainty, in his view, just gives him enormous additional leverage beyond the actual tariffs. Because people are worried about what he’ll do.”
But Cutler and other trade experts agree Trump’s wings have been clipped. The 10% replacement tariff lasts only 150 days, and new tariffs imposed under other statutes will take longer to implement, robbing the president of the “anytime, anywhere for any reason” cudgel he used to impose tariffs before his use of the International Emergency Economic Powers Act was nixed.
“He’s lost his favorite tool,” Cutler said. “Particularly for foreign policy matters and things that irk him on other countries that have nothing to do with trade, he’s lost the ability to offer a credible threat.”
William Reinsch, a former senior U.S. government official who is now with the Center for Strategic and International Studies, said the Supreme Court’s solid 6-3 ruling diminished Trump’s ability to threaten other countries.
“It takes away his ability to wave the big stick around,” he said, although the economic impact will be limited, with the 10% tariff and other duties expected in coming months replacing some if not all the tariffs now deemed illegal.
Michael Froman, president of the Council on Foreign Relations, said the ruling and the administration’s response left many questions unanswered, including how importers could get refunds for duties collected illegally, and what further tariffs were still coming.
“Perhaps the most consequential impact of the Supreme Court’s decision is that it should curtail the threat or use of tariffs as the president’s preferred form of leverage or punishment outside the trade domain,” said Froman, who served as former President Barack Obama’s chief trade negotiator from 2013 to 2017.
That development could provide relief to countries scarred by Trump’s unpredictability and repeated use of tariff threats to punish them over non-trade matters, extract concessions and secure foreign investments.
The U.S. president had invoked IEEPA to impose tariffs over a range of non-trade issues, leaving countries bruised and skittish, and heightening uncertainty for companies around the world. He threatened tariffs against European countries over their opposition to his claims on Greenland, against Canada for allowing the importation of electric vehicles from China, and against Brazil for its treatment of far-right former President Jair Bolsonaro, a Trump ally.
NO MORE ‘TRADE BAZOOKA’
Josh Lipsky, chair of international economics at the Atlantic Council, cautioned that it was too early to predict the impact of the Supreme Court’s ruling on Trump’s leverage, given uncertainty about fresh tariffs and the president’s willingness to use a range of tools.
“It’s a significant blow to his international economic trade agenda. It’s not a crippling one, necessarily, because of the other authorities, but we have to see how they play out in practice,” he said. “It feels like the ‘tariff armada’ has come to the rescue despite IEEPA. But how that plays out in terms of leverage is a different question in the months ahead.”
It is also unclear what will happen to nearly 20 framework deals or firmer trade agreements that the Trump administration has reached with countries in recent months that were based on the IEEPA tariff threats.
Trump, U.S. Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent insisted on Friday that the deals should remain in effect, even if those rates were higher than the temporary universal tax.
Analysts said they doubted countries could seek to abrogate or renegotiate deals, out of concern of triggering Trump’s ire.
Miriam Sapiro, a former senior U.S. trade official and adjunct professor of international and public affairs at Columbia University, said Trump might have lost his “trade bazooka,” but she didn’t expect the existing deals to unravel. However, the ruling could give countries more leverage in new or ongoing negotiations with the Trump administration, Sapiro said.
“There’ll still be interest in doing deals because of the uncertainty and the desire to keep the U.S. as a strong ally and strong partner,” she said. “But countries do have a bit more bargaining power than they might have felt they had previously.”
From Trump’s perspective, she said, using IEEPA was a risk he was willing to take because it helped reel in some trade deals quickly, although details still needed to be worked out in some cases and enforcement could be challenging.
Greer told Fox News’ “Special Report” program that IEEPA was the appropriate tool at the time, given Trump’s desire to move quickly and flexibly, and said it had helped open market access for U.S. firms. “We don’t regret it,” he said. “We’ll just use a different tool.”
Initial reactions from overseas were measured as countries assessed the Supreme Court decision. South Korea said it would review the ruling and U.S. response and planned to continue “amicable” talks over implementation of a tariff agreement finalized in November with $350 billion in investment pledges.
Tom Ramage, an economic policy analyst at the Korea Economic Institute of America, said the Trump administration’s continued ability to tap other tariff measures would likely persuade South Korea and its companies to maintain their commitments.
“Anything less could increase the likelihood that the president will impose further retaliation, especially if the administration seeks to make an example of countries that want to back out of negotiated deals,” he wrote on KEI’s website.
(Reporting by Andrea Shalal;Editing by Dan Burns and Paul Simao)
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