The clash between the president of the United States of America, Donald Trump, and the nation’s Supreme Court on the issue of the former’s utilisation — weaponisation — of tariffs will have global and domestic repercussions. On Friday, in a 6-3 decision, the US Supreme Court declared that Donald Trump had exceeded his authority by imposing sweeping tariffs on a range of imports from trading partners. A clutch of states and small American businesses had sued Mr Trump’s administration, arguing that he had encroached upon the US Congress’s powers and autonomy by inflicting the worldwide tariffs. Ironically, the International Emergency Economic Powers Act, the provision that Mr Trump used to impose his bouquet of tariffs, does not even mention the term, ‘tariff’. Mr Trump, characteristically, has dug in his heels. A day after the blow from the highest court — Mr Trump denounced the judges who nixed his tariff regime as disloyal and unpatriotic — the US president used other provisions to raise the new global tariff rates to 15%, up from the 10% that was declared initially. This means that while for some nations, the new tariff rates may actually be higher than what had been applied previously to their exports, some other countries, including India, may end up paying slightly lower rates than before.
The net result of all this is uncertainty regarding crucial issues. How, for instance, would the court’s decision affect Mr Trump’s leverage on China, a nation that he is expected to visit? There is more. According to estimates by economists at the Penn-Wharton Budget Model, the tariffs yielded by Mr Trump under the IEEPA had led to the amassing of more than $175 billion. This amount now needs to be refunded. But will Mr Trump acquiesce, given his domestic political compulsions? With Mr Trump losing the legal legitimacy for his tariff regime, would nations, many of whose governments had faced public backlash for being supplicatory towards the US — India is an example — choose to honour the terms of the trade deals? Mr Trump has insisted that the India trade deal will remain unaffected. New Delhi has adopted a policy to wait and watch developments — for now. But a clearer response needs to be crafted sooner than later. What makes this decision-making particularly challenging is the unpredictability that has been ushered in, first by Mr Trump’s tariff regime and, now, by the US Supreme Court’s dismissal of it.