The Supreme Court’s decision overturning President Trump’s use of emergency powers to impose tariffs on imports isn’t the game-changer for international trade that it might appear to be at first.
In Asia, Europe and the Americas, governments don’t expect Trump to abandon his favorite tool of economic policy, despite the legal setback. Trump has said tariffs are essential for reviving U.S. manufacturing and raising revenue.
U.S. trading partners are bracing for more tariff action as the president seeks substitutes for the levies the Supreme Court said he must now remove.
Trump said Friday he would impose a new, temporary global tariff of 10% under a different legal authority. He also said U.S. trade officials would open new investigations into unfair trade practices, giving him another route toward fresh levies.
“This is Tariff Man. There’s no way he takes this lying down,” said Jeremy Chan, senior analyst for China and northeastern Asia at Eurasia Group, a political-risk research firm.
On Friday, the Supreme Court ruled that Trump’s signature policy, the imposition of what he termed reciprocal tariffs on allies and adversaries alike, was unconstitutional. Trump overstepped his authority by invoking the 1977 International Emergency Economic Powers Act, or Ieepa, to impose those levies, the court said in a 6-3 decision.
The ruling also struck down tariffs imposed on China, Mexico and Canada related to fentanyl.
China has been one of the main targets of Trump’s trade assault. The court decision could weaken his hand going into negotiations with Chinese leader Xi Jinping over trade this spring.
The decision could provide a short-term win for large companies overseas that hope to receive refunds on tariffs on billions of dollars of international trade, though the court didn’t provide guidance on whether refunds were necessary. Shares of luxury-goods companies in Europe including LVMH, Hermès and Richemont jumped Friday in anticipation of fatter profits.
The court’s decision complicates Trump’s effort to impose an oil blockade on Cuba as he threatened punitive tariffs under Ieepa on any country shipping oil to the communist island. Mexico halted its oil shipments to Cuba in response.
Foreign governments aren’t likely to demand a renegotiation of trade and investment pacts they made with the White House since Trump returned to office, analysts said. Trump concluded deals with Japan, South Korea, India, the European Union and the U.K.
“Every partner we have talked to knows how painful this administration can make things and would prefer to just let sleeping tariffs lie,” said Philip Luck, director of the economics program at the Center for Strategic and International Studies, a Washington, D.C.-based think tank, and a former State Department official.
Last month, Trump threatened to raise tariffs on many South Korean imports to 25%, from 15%, citing delays in the country’s legislature in approving $350 billion of planned investment in the U.S.
A U.S.-EU agreement last year set a 15% tariff on most U.S. imports from the EU. The Supreme Court ruling sows confusion over whether many of those levies can be collected, though some goods such as autos are subject to other tariffs. But with alternative legal means for levying tariffs at Trump’s disposal, “We therefore fear that a 15% tariff rate for EU imports will be reintroduced in the near future,” said Oliver Richtberg, head of foreign trade at VDMA, a lobby group for German industry
Olof Gill, a spokesperson for the European Commission, the EU’s executive arm, said: “We remain in close contact with the U.S. administration as we seek clarity on the steps they intend to take in response to this ruling.” He added that the EU continues “to advocate for low tariffs and to work towards reducing them.”
India reached its trade deal with the U.S. in February, after Trump imposed additional tariffs in August. New Delhi is unlikely to take any unilateral steps in response to the court ruling, diplomatic experts said, and will instead watch Trump’s next moves.
For some countries, the economic pain comes not from Ieepa but from other tariffs that could now become Trump’s favored tool for leveling what he sees as unfair trade imbalances and raising revenue.
Japan faces a 15% levy on its mainstay car exports to the U.S. under so-called Section 232 tariffs related to national security. Japan in recent days unveiled more than $30 billion in planned investments in the U.S., part of a July pledge to invest $550 billion over the remainder of Trump’s term.
Most Canadian exports enter the U.S. exempt from Ieepa tariffs because the goods comply with the terms of the U.S.-Mexico-Canada Agreement. But the Canadian economy is being squeezed by other tariffs of up to 50% that target steel, aluminum and forest products. The White House said the new 10% tariff wouldn’t apply to USMCA-compliant goods from Mexico or Canada.
Even before the Supreme Court ruling, more tariffs were in the pipeline. U.S. trade officials are conducting investigations into imports of semiconductors, pharmaceuticals, drones, wind turbines and medical equipment. Such investigations typically pave the way for tariffs. Countries with trade and investment deals can claim some protection from any additional tariffs.
Regardless of the court ruling, “Tariffs are here to stay,” said Lawrence Herman, a Toronto-based trade lawyer and former Canadian diplomat.
Write to Jason Douglas at jason.douglas@wsj.com, Kim Mackrael at kim.mackrael@wsj.com and Paul Vieira at Paul.Vieira@wsj.com