The Supreme Court Struck Down Trump's Tariffs. Then He Raised Order a New Global Tariff. Here's What's Going On.
In the span of about 48 hours last weekend, US trade policy went through two major upheavals. On Friday, the Supreme Court ruled 6-3 that President Trump had exceeded his authority in imposing sweeping tariffs under the International Emergency Economic Powers Act (IEEPA). Markets rallied on the news. Following the ruling on Friday, Trump announced a new 10% global tariff. Then, on Saturday, Trump announced he was raising the global tariff from 10% to 15% under a different legal authority.
Let's Back Up: What Were the IEEPA Tariffs?
Earlier in 2025, Trump used the International Emergency Economic Powers Act — a law originally designed to let presidents respond to foreign national security emergencies — to impose a broad set of tariffs on imports from countries around the world. These tariffs raised prices on a wide range of goods and triggered retaliatory measures from trading partners. Hundreds of billions of dollars in tariff revenue was collected under this authority.
The legal question was whether IEEPA actually gives the president the power to impose tariffs. The Supreme Court said no. Chief Justice Roberts, writing the opinion for a 6-3 majority, concluded that the Constitution grants the power to impose tariffs to Congress, not the executive branch. The ruling means the IEEPA tariffs were illegal, and billions in already-collected tariff revenue could potentially be refunded to importers.
Trump's Response: A New Legal Route
President Trump moved immediately to a different legal mechanism: Section 122 of the Trade Act of 1974. This law gives the president authority to impose tariffs in response to a balance-of-payments emergency, essentially, a situation where the US is running large trade deficits that threaten the economy.
The legal durability of this approach is also uncertain. Section 122 tariffs are generally limited to 150 days without congressional approval, and Congress is unlikely to vote to extend them given bipartisan concerns about trade war costs. This means trade policy may be headed back to the courts — or to Congress — later this year.
How Did the World Respond?
The reaction was immediate and sharp. The European Union warned that the tariff hike could jeopardize transatlantic trade deals and paused ratification of a previously agreed US-EU trade arrangement. Multiple other trading partners also signaled they were reassessing agreements reached under the previous tariff policy. The EU specifically called for "full clarity" on what the US intends to do now that the IEEPA authority has been struck down.
What Does This Mean for You?
Tariffs are ultimately a tax on imports, and like most taxes, a significant portion of the cost gets passed along to consumers through higher prices. A 15% global tariff on imported goods means that products with significant foreign components (electronics, appliances, clothing, cars) are likely to cost more.
For the Fed, ongoing tariff uncertainty is a complicating factor. Higher tariffs tend to push prices up, which works against the Fed's goal of getting inflation back to 2%. That's part of why the market is now pricing in fewer rate cuts in 2026. Central bankers are generally hesitant to lower rates if tariffs keep inflation elevated.
The broader uncertainty is also just bad for business planning. Companies that import materials, run global supply chains, or sell into foreign markets are having a hard time budgeting and planning when trade policy can shift over a single weekend.
Sources: CNBC, Bloomberg, Reuters, Charles Schwab