Trump Unable to Honor Many Negotiated Deals After Supreme Court Ruling Cripples America’s Chief Negotiator
The Supreme Court delivered a significant 6-3 ruling today that undermines the executive branch’s control over international trade, declaring President Trump’s broad application of emergency powers to impose tariffs illegal. This decision threatens the foundation of the administration’s economic policy, effectively removing the strongest bargaining tool from the nation’s chief negotiator.
Most of Trump’s tariffs were implemented using the International Emergency Economic Powers Act (IEEPA). The administration invoked this act to justify a wide array of reciprocal tariffs against most trading partners, claiming a “balance of payments emergency.” Furthermore, specific tariffs were placed on Canada, China, and Mexico under the guise of a “drug trafficking emergency.” The Supreme Court ruled that using the IEEPA for these objectives is not lawful.
Since Trump’s “Liberation Day” in April 2025, when the bulk of these tariffs were established, the U.S. Treasury has collected a staggering $240 billion in customs revenue, according to a note. This total reflects a $180 billion jump compared to the same period in 2024. Ashworth continued, noting that based on 2024 import volumes, the effective tariff rate theoretically climbed from just 2% last year to about 14%, with nine percentage points of that rise directly linked to the IEEPA tariffs that have now been ruled illegal.
With the tariffs invalidated, the Treasury is now expected to face pressure to issue massive refunds to importers. Estimates indicate the cost of these refunds could reach around $120 billion, which equals 0.5% of U.S. GDP. Although the majority opinion did not specify a repayment process, dissenting Justice Brett Kavanaugh warned of an impending administrative crisis. He pointed out that the Court did not address how the government should return the funds, but he admitted that the process would undoubtedly be chaotic.
Ashworth also described the strategy Trump might use to reinstate the tariffs that were overturned. The summary is that his options are significantly more restricted.
Trump’s limited remaining options
Beyond the fiscal nightmare, the ruling severely weakens Trump’s approach to bilateral diplomacy. Ashworth anticipates that the president will have to shift to Section 122 of the 1974 Trade Act. This law outlines the powers Congress grants the executive branch to handle “large and serious” balance of payments deficits, but Ashworth noted it is highly restrictive. It limits tariffs to a maximum of 15% and a duration of 150 days, unless Congress extends them. Additionally, the tariff must be “non-discriminatory,” applying a single rate to all partners. This renders Trump’s “Liberation Day” strategy obsolete, as he had previously used the IEEPA to impose varying rates on different partners almost daily.
“Trump will no longer be able to honor many of the ‘deals’ he has negotiated” with individual countries, Ashworth stated.
The administration’s other legal paths look just as unpromising. Trump might try to utilize Section 338 of the outdated 1930 Smoot-Hawley Tariff Act, which technically permits the president to impose tariffs of up to 50% on discriminatory nations. However, Ashworth believes courts would rule that the specific provisions of the 1974 Trade Act take precedence.
Consequently, Trump is left depending on older, more burdensome statutory “workhorses.” He could resort to Section 232 of the 1962 Trade Expansion Act, which is based on national security justifications and has already been heavily used by his administration for tariffs on steel, aluminum, lumber, semiconductors, and automobiles. He could also use Sections 201 and 301 of the 1974 Trade Act on anti-competitive grounds. However, for a president who prefers rapid, unilateral action, these statutes require lengthy investigations before tariffs can be applied.
Meanwhile, time is running out before the midterm elections. Given voter frustration over high electricity bills, AI technology that threatens jobs, and the burden of tariffs that were largely illegal for much of the past year, it is unlikely that a Congress with a stronger Democratic majority would approve any tariffs after November.