The court singled out Trump’s use of the International Economic Emergency Powers Act, or IEEPA, to levy tariffs on almost all countries and particular tariffs on Canada, China and Mexico – allegedly for facilitating the importation of fentanyl into the United States. The legal basis for the ruling was that the IEEPA makes no mention of tariffs.

This is the first major case where SCOTUS has limited the power of the presidency under Trump.

Trump was not happy about the decision, saying, “I can do anything I want” and re-imposed a global 10% tariff on imports using the Section 122 of the Trade Act of 1974, which allows the president to impose tariffs of up to 15% in response to a “large and serious” balance of payments deficits. The United States has been running large and serious trade deficits for decades, mainly because U.S., European and Japanese corporations have offshored production meant for the U.S. market, for example Apple’s computers and smartphones.

However, this law only allows for tariffs for a period of 150 days, meaning that Trump would have to ask Congress to agree to an extension in July. This is very unlikely to happen with the midterm elections looming.

Trump is also likely to expand sectoral, or good specific tariffs under section 232 of the Trade Expansion Act of 1962 where imports are a “threat to national security.” He has already used this to put tariffs on aluminum, steel, copper, lumber and wood products. This act is commonly misused because the threat to national security is not defined.

For example, imported kitchen cabinets are being tariffed because the wood products industry is claimed to be important to national security. However, this act requires an investigation and finding by the Commerce Department which takes time and effort and cannot be done on a whim.

In a sign that the chaotic tariff rollout and retractions are not over, the day after Trump declared 10% global tariffs, he raised the rate to 15%, the maximum allowed by law. Still to come will be lawsuits by U.S. companies seeking to be reimbursed for the billions of dollars in the illegal tariffs that they paid. Finally, are the review of the USMCA (formerly NAFTA) coming up in July, where the United States is expected to try to tighten trade rules.

While the SCOTUS decision was a setback to Trump’s imperial presidency, it by no means a return to a more free trade approach.

Both Democrats and Republicans are likely to restrict trade, in particular with China, which is surpassing the United States in one industry after another. For example, Trump used the section 301 of the Trade Act of 1974 in his first term to impose tariffs on imports from China on the basis of “unreasonable or discriminatory” trade practices by a country as found by the U.S. trade representative. These tariffs were maintained by the Biden administration and continue to this day.

Even a future Democratic administration is likely to keep major tariffs, especially since there are now industries benefiting from protection.

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While Trump claimed that foreign companies would pay for the tariffs by being forced to cut their prices, this did not happen. This can be easily seen in the index of import prices, which was exactly the same in December of 2025 as it was a year earlier in December 2024.

Economic study after economic study said that 90% or more of the cost of the tariffs were being paid by U.S. businesses or consumers. The Trump administration finally had enough of hearing the truth, so their chief economist, Kevin Hassett, said that the authors one study (who were on the economic research staff of the New York Federal Reserve Bank) should be “disciplined.”

There are two reasons why Trumps tariffs were not able to bring back more manufacturing jobs.

If Trump’s goal was to bring back manufacturing to the United States, he needed to bring down the prices of goods and labor that manufacturing needs. Instead, he put tariffs on raw materials and intermediate goods (manufactured goods that are used to make finished products) like steel and aluminum.

Also, while Trump likes to harken back to the industrialization during the McKinley administration (1897-1901) when tariffs were high, he omits the fact that the factories of that time were filled with immigrant labor. Thus, Trump’s attempt at mass deportation and terrorizing immigrants are driving away the very workers needed to re-industrialize.

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Trump was reacting to China’s announcement late Wednesday that it was strengthening its export regulation of rare earths and their products, in particular to prevent diversion to use by hostile militaries. China, in turn was reacting to the United States strengthening its export controls on computer chips in September. China also responded to the imposition of U.S. port fees on Chinese-operated and Chinese-built ships with similar regulations, which mainly fell on ships with some U.S. ownership.

Many people knowledgeable about China were left wondering why Trump reacted with higher tariffs, since the April escalation of tariffs to over 140% didn’t work. If anything, China’s economy may be even stronger to withstand another round of U.S. tariffs than it was in April. The latest trade report from China showed that while China’s exports to the United States had dropped more than 25% in September as compared to a year ago, overall exports had risen 8.3%. This shows that China has been successful in expanding trade with the rest of the world to more than offset the loss of U.S. markets.

China’s imports also rose 7.4% in September as compared to a year earlier. This is a sign that China’s economy is doing relatively well, as a growing economy will buy more imports. Here too China has managed to buy imports from other countries such as Brazil, which has become China’s main source of soybeans instead of U.S. farmers.

While China has pledged to retaliate if and when the Trump administration goes through with the high tariffs, there are still more than two weeks for Trump to back off.

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The average U.S. tariff rate on imported goods has gone up from about 2.5% before Trump unleashed his trade war in April to about 18% today. This increase in tariffs of about 15% would require a drop in import prices of about 13% to fully offset them, meaning that the foreign exporters would be paying the entire cost of Trump’s tariffs.

But in fact, the average price of imports has started to rise, not fall. In July of 2025, U.S. import prices rose 0.4%, and over the past year have fallen 0.2%, far from the 13% drop needed for “the world” to pay for Trump’s tariffs. This means that the vast majority of the tariffs are being paid by U.S. businesses and consumers.

Tariff-related price increases have just started to show in the Consumer Price Index or CPI. The CPI has gone from a low of 2.4%, as compared to prices a year earlier in March, before Trump’s “Liberation Day” tariffs, to the latest 2.7% in July. So far it seems that the bulk of the cost of tariffs have been borne by U.S. businesses, but more and more of them are saying that they will be raising prices in the future.

This is not a small matter, as Trump is continuing to raise tariff rates, with the de minimis exception on all countries but China ending at the end of August (China’s de minimis tariff exception already ended).Trump is also threatening even more tariffs, as high as 200% on medical drugs, and 300% on semiconductors. Given that these tariff hikes from Trump never seem to end, the price increases will be even greater as time goes on.

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While the GDP report for January through March showed negative growth, this was mainly because of the large surge in imports to try to beat Trump’s tariffs. If all other sectors had stayed the same, the import surge would have dragged the economy down by 4.7%. Then in the second quarter of the year, imports dropped by an even larger amount as Trump’s tariffs began to bite, which would have caused GDP to grow by 5.2%.

So, when we wash out the boom and bust in imports, by putting the first two quarters together, there was an average of 1.25% annual rate of growth. Because there was also a big shift in inventories of unsold goods, which surged in the first quarter as imports piled up, and then dropped in the second three months as they were sold off, economists often look at final sales to domestic private purchasers, which also excludes changes in government spending. This figure was only up 3%, as compared to a 5.3% rate of growth in the second quarter of 2024.

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