New Delhi, Feb 21 (.) The US Supreme Court’s decision to strike down President Donald Trump’s emergency tariff measures marks a significant shift in American trade policy, even as the administration has quickly imposed a fresh 10 per cent global import duty under an alternative legal route, according to a detailed analysis by SBI Research.
In its latest report “Leaning Into the Wind: US Supreme Court Scraps US Tariff,” released here on Saturday SBI Research said the court’s 6-3 verdict invalidated the administration’s use of the International Emergency Economic Powers Act (IEEPA) to impose sweeping tariffs.
The court ruled that the Constitution grants Congress — not the President — the authority to levy taxes and duties during peacetime, and that emergency powers under IEEPA could not be stretched to justify broad tariff impositions.
The judgement reinforces the principle that the executive must have clear congressional authorization to impose such measures. The report noted that the ruling draws heavily on constitutional “originalism,” underlining that taxation powers lie squarely with Congress.
However, the tariff story does not end there.
Within hours of the ruling, the administration invoked Section 122 of the Trade Act of 1974 to impose a 10 per cent tariff on all imports for 150 days, effective February 24, 2026. Notably, this is the first time Section 122 has ever been used.
Under the law, the President can impose temporary import surcharges of up to 15 per cent to address balance-of-payments concerns, though the measure expires after 150 days unless Congress approves an extension.
SBI Research highlighted that the move is being positioned as a response to the US’ widening external imbalance.
The goods trade deficit surged by over 40 per cent in 2024 to USD 1.2 trillion, while the current account deficit widened to 4 per cent of GDP. The US net international investment position has fallen to a deeply negative USD 26 trillion — nearly 89 per cent of GDP.
While the Supreme Court invalidated tariffs imposed under IEEPA, it did not shut the door on other statutory tools. The dissenting opinion in the judgement pointed to alternative provisions such as Section 122, Section 201, and Section 301 of the Trade Act of 1974, which provide separate legal avenues for imposing trade restrictions.
SBI Research observed that this legal tug-of-war between the executive and judiciary could reshape global trade dynamics.
The court’s ruling may generate uncertainty around existing trade deals that were negotiated under the earlier tariff framework. Since the legal challenge was filed by private firms rather than sovereign nations, the impact could extend across multiple trade agreements and jurisdictions.
The report also flagged a potentially complex issue: refunds of excess tariffs already collected.
The Supreme Court has referred the matter back to the US Court of International Trade to determine the scope of excess collections. Estimates suggest that USD 160–175 billion may have been collected under the invalidated tariff regime, raising the possibility of large-scale refund claims.
At the same time, sector-specific tariffs under Section 232 of the Trade Expansion Act of 1962 — covering steel, aluminum, automobiles and other products — remain intact, meaning that certain trade barriers will continue.
SBI Research concluded that while the court’s decision reduces uncertainty over the use of emergency powers, it opens a new phase of strategic trade negotiations. With Congress now playing a more decisive role and alternative statutory tools in play, the global tariff landscape is likely to remain fluid.
The evolving legal and policy framework, the report noted, will have implications for global supply chains, bilateral trade relations, and investor sentiment in the months ahead.
. SAS PRS