The U.S. Supreme Court rejects Trump's tariffs, plunging global trade into dual shocks of policy and market volatility.

On February 20, 2026, the U.S. Supreme Court ruled 6-3 that the global tariffs imposed by former President Trump under the International Emergency Economic Powers Act were unconstitutional. Just hours after the ruling, Trump signed an executive order invoking Section 122 of the Trade Act of 1974, announcing a 10% temporary tariff on almost all goods imported into the United States from nearly every country, effective from February 24 for a duration of 150 days. The following day, he further announced on social media that the tariff rate would be increased to 15%. This political and judicial struggle in Washington immediately plunged global trade into new uncertainty. Markets in Asia and Europe urgently assessed the impact, while businesses faced dual pressures of surging costs and potential legal recourse.

Judicial Rulings and Policy Reversals: A Tug-of-War Over Constitutional Power

The focus of the Supreme Court's ruling lies in the attribution of taxation authority. The justices argued that by invoking the International Emergency Economic Powers Act—designed to address national security emergencies—to impose tariffs, Trump essentially bypassed the exclusive taxation power granted to Congress by the Constitution, constituting an overreach of executive authority. This ruling continues the trend in recent years of federal courts scrutinizing the expansion of executive power. However, shortly after the decision was issued, the Trump team swiftly switched legal tools, activating Section 122 of the Trade Act of 1974.

The Act authorizes the President to impose temporary tariffs of up to 15% for a maximum of 150 days in response to significant international payment deficits. U.S. Trade Representative Jamison Greer acknowledged on CBS's "Face the Nation" that the legal flexibility previously available under the emergency declaration has been lost, but emphasized that the policy remains unchanged—only the tools have shifted. The White House plans to initiate other investigative procedures, such as a Section 301 investigation based on unfair trade practices, within this 150-day window, aiming to extend the policy after the temporary tariffs expire. This shift in tools highlights the complexity of the U.S. trade policy toolkit and reflects the executive branch's maneuvering room within the ambiguous areas of congressional authorization. Greer stated plainly in the interview: For years, Congress has granted the President extensive authority to set tariffs.

The immediate reactions and strategic confusion of global trade partners.

The shockwaves from the verdict and new policies rapidly spread from Washington to the rest of the world. Asian trading partners bore the brunt. India's Ministry of Commerce and Industry postponed a trade negotiation delegation visit to the U.S. originally scheduled for February 22, deciding to first consult with the U.S. side to clarify the situation. South Korea's Minister of Trade, Industry and Energy, Kim Jong-gwan, stated during a meeting with business leaders on the 23rd that to maintain the balance of interests established by the Korea-U.S. agreement, they would continue consultations with the U.S., but did not specify concrete measures. He frankly told reporters that it remains unclear whether the tariffs already levied will be refunded.

The Chief Cabinet Secretary of Japan expressed more cautious remarks on the 21st, stating that they would carefully study the content of the ruling and the response of the Trump administration. Hong Kong's Secretary for Financial Services and the Treasury, Christopher Hui, described the U.S. situation as a misstep. At a press conference on the 21st, he pointed out that the new tariffs instead highlight Hong Kong's independent trade advantages and policy stability. Nattaporn Chiralerspong, Director-General of Thailand's Trade Policy and Strategy Office, noted another dynamic: uncertainty is prompting exporters to accelerate shipments to the U.S. due to fears of subsequent tariff increases, creating a front-loading effect that may boost Thailand's exports in the short term.

The reaction from Europe is more somber. European Central Bank President Christine Lagarde used an analogy in an interview: it's like driving—you want to know the traffic rules before hitting the road. She pointed out that businesses and investors need clear, predictable rules, rather than getting bogged down in legal disputes and tariff refunds. The German Finance Minister had previously stated bluntly that tariffs harm everyone, and the biggest poison is precisely this uncertainty surrounding tariffs. The European Union has urgently convened a meeting of member states to assess whether its existing trade agreement with the United States, which includes a 15% tariff cap, is being impacted.

Corporate Dilemmas: Surging Costs, Refund Ambiguities, and Supply Chain Restructuring

For hundreds of thousands of businesses worldwide engaged in trade with the United States, this turmoil translates into concrete financial and operational pressures. William Bain, Head of Trade Policy at the British Chambers of Commerce, points out that approximately 40,000 UK businesses export to the U.S. With tariffs potentially rising from 10% to 15%, British exporters would face an additional 2 to 3 billion pounds in tariff costs. These costs must either be absorbed by the exporters, squeezing their profits, or passed on to American customers. Bain notes that industries such as food and beverages, textiles, industrial goods, and electrical products are suddenly facing a significant increase in export costs to the U.S., which will inevitably dampen their willingness to trade.

A larger legal fog looms over the issue of approximately $130 billion in paid tariff refunds. The Supreme Court's ruling has paved the way for businesses to reclaim tariffs paid since April 2025, but the decision does not directly address the refund process. It is reported that hundreds of companies, including retail giant Costco, have recently filed lawsuits to seek eligibility for refunds. Tim Doggett, CEO of the UK Chemical Business Association, pointed out that this creates further legal and contractual uncertainty, making it difficult for suppliers and customers to determine final liability—a process that could be lengthy, costly, and span several years. Bob Schwartz, Senior Economist at Oxford Economics, analyzed that the Trump administration might utilize other tools, including Section 122 alternative tariffs, to avoid large-scale refunds.

Uncertainty is reshaping supply chains. William Bain observes that companies are seeking trade diversification, increasingly turning to European markets and the rapidly growing Indo-Pacific markets. This supply chain adjustment, aimed at circumventing U.S. policy risks, may become a lasting impact of this volatility. Meanwhile, the domestic industrial landscape in the United States is also diverging. Indiana Republican Governor Mike Braun believes that, as one of the states with the largest per capita manufacturing scale, tariffs help reverse industrial hollowing out and attract investment back. On the other hand, Kentucky Democratic Governor Andy Beshear points out that industries such as bourbon whiskey have been severely hit, with studies showing that up to 90% of tariff costs are borne by U.S. businesses and consumers, increasing the costs of large-scale construction projects by approximately 30% and dragging down employment growth.

Political Gamesmanship and Future Directions: The Dangerous Game Before the Midterm Elections

This tariff dispute occurred several months before the 2026 U.S. congressional midterm elections, carrying strong undertones of domestic political maneuvering. Following the ruling, Trump publicly criticized the six justices who voted in favor as unpatriotic and disloyal to the Constitution, even claiming that the court was influenced by foreign interests. Although Trade Representative Greer attempted in an interview to explain the foreign interests as the foreign companies that filed the lawsuit, the president's harsh rhetoric further intensified the political tension.

Subtle divisions have emerged within Congress regarding this issue. Previously, six Republican House members voted to revoke tariffs on Canadian goods. Greer downplayed the matter, describing them as individuals who oppose the President on everything. However, a CBS poll indicates that Trump’s approval rating on economic issues stands at only 39%. The Trade Representative expressed willingness to discuss with Congress how to legislate the President’s trade agenda but made it clear that they would not halt their plans.

In the short term, the White House's roadmap is clear: rely on Section 122 to maintain tariff pressure for 150 days, while initiating investigations under Section 301 and other provisions to establish a legal basis for subsequent measures. In the long run, the sustainability of this policy depends on three variables: whether Congress is willing to pass legislation to grant explicit authorization, whether the Supreme Court will challenge other tariff tools in the future, and how the results of the November midterm elections will shift the balance of political power in Washington. The warning from European Central Bank President Christine Lagarde still resonates: the independence of central banks is crucial because the effects of their decisions may not materialize until 6 to 24 months later, making it essential to shield them from short-term political fluctuations. Today, this same logic applies to trade policy—hasty executive orders can change the rules overnight, but the far-reaching consequences they trigger, such as global supply chain restructuring, inflationary pressures, and erosion of trust among allies, will gradually unfold over the coming years, to be borne by the economy and the people, both in the United States and globally.