“By holding that the IEEPA does not authorize the President to impose tariffs, the Supreme Court has effectively removed the legal foundation for emergency-based reciprocal duties that were used as the negotiating baseline,” said Agneshwar Sen, trade policy leader, EY India.
“For India, this will require a redrawing of the structure of the trade deal. Any US offer to reduce applied tariffs in exchange for MFN liberalization now requires a firmer statutory basis, potentially involving Congress. This may slow the deal finalization, but it will enhance legal certainty and reduce the risk of sudden executive tariff actions,” Sen added.
Mint explains:
Why did Trump’s decision to impose higher tariffs end up in the Supreme Court?
The legal battle began on 2 April 2025, when Trump declared America’s long-running trade deficit a “national emergency” and imposed a 10% tariff on nearly all imports, later raising duties to as high as 50% for countries including Brazil and India. The administration argued that decades of deficits had weakened US industry and posed an economic threat.
Critics countered that the US has run trade deficits since 1975 without invoking emergency powers, and that the IEEPA was never intended as a tariff statute. Designed to block financial transactions and freeze assets tied to hostile actors, the law was nevertheless used to justify tariffs that reportedly generated about $100 billion in additional customs revenue.
Three lower courts rejected that interpretation. The US District Court for the Northern District of Illinois first questioned the tariff authority claim. The US Court of International Trade then ruled that the IEEPA did not permit general tariffs and that such use of emergency powers violated the Constitution’s separation of powers—a decision upheld by the US Court of Appeals for the Federal Circuit.
On 23 August 2025, the Supreme Court agreed to hear the appeal and has now ruled that the IEEPA does not confer sweeping tariff authority, effectively curbing the use of emergency powers for broad-based trade measures.
Why is imposing sweeping tariffs harder now?
The ruling does not eliminate presidential tariff powers altogether, but it removes the sweeping emergency-based route that allowed rapid, across-the-board duties without sector-specific justification.
What remains are narrower statutory tools that require procedural compliance and are open to judicial review, limiting the ability to deploy tariffs simultaneously against multiple countries as a universal enforcement instrument.
The judgment reinforces Congress’s constitutional primacy over trade and taxation. Future administrations may still impose targeted duties under existing trade laws, but sweeping cross-country tariffs will now require clearer legislative backing.
For trading partners negotiating with the US, the decision reduces uncertainty around sudden tariff escalation while shifting disputes toward slower, rules-based processes rather than executive proclamations.
Section 122 of the Trade Act of 1974
Section 122 allows the President to impose temporary import surcharges to address serious balance-of-payments deficits. However, it has never been used in the five decades since its enactment. Any tariff imposed under this provision automatically expires after 150 days unless extended by Congress.
The statute was designed for the era of fixed exchange rates, when countries faced currency crises and external payment shortfalls. Since the global shift away from that monetary system in the 1970s, Section 122 is applicable only in the event of a major international payments crisis—a condition the US does not currently face. As a result, attempts to justify broad tariffs under this provision would rest on uncertain legal and economic grounds.
Using this legal provision, the Trump administration has imposed a 10% universal tariff on all countries after the Supreme Court order.
Section 338 of the Tariff Act of 1930
Section 338 authorizes the President to impose retaliatory duties if a foreign country is found to be discriminating against US exports in a manner that places American goods at a disadvantage. The provision allows the President to levy additional tariffs equivalent to the discriminatory treatment, but only after establishing clear evidence of unequal or unfair trade practices.
However, it cannot be applied easily or casually, as the government must meet strict conditions and provide strong evidence before invoking it. The administration must demonstrate specific discriminatory actions by a foreign government, rather than rely on broad economic concerns such as trade deficits. The measure is country-specific and targeted, not systemic or universal.
Moreover, the provision has never been used in modern trade practice, partly because more structured mechanisms such as Section 301 investigations have evolved to address unfair trade disputes.
Section 232 of the Trade Expansion Act of 1962
Section 232 permits import curbs on national security grounds. It has been used to impose tariffs on steel and aluminium. However, the provision requires a formal investigation by the commerce department and a finding that imports threaten national security. The process involves procedural safeguards and public reporting, making it slower and more targeted than the emergency-powers route.
The sector-specific tariffs on steel and aluminium, copper and auto components were imposed using this Act, and it will remain in practice.
Section 301 of the Trade Act of 1974
Section 301 allows tariffs to counter unfair trade practices by foreign governments. It requires investigations by the Office of the US Trade Representative, consultations with affected parties, and formal findings before duties can be imposed. The process can take months and is open to domestic and international legal challenges.