The US Supreme Court on Friday struck down Donald Trump's sweeping emergency universal tariffs, dealing a significant blow to the President's signature trade policy.
The ruling is set to inject new uncertainty into the global economy, which has so far been resilient in the face of tariffs and shifting trade patterns.
The White House had argued that Mr Trump holds the power to unilaterally impose tariffs under the International Emergency Economic Powers Act (IEEPA), which grants the president power to regulate economic transactions upon declaring a national emergency.
Delivering the opinion for the 6-3 majority, Chief Justice John Roberts said granting the president power to unilaterally impose tariffs under IEEPA would be a “transformative expansion” of the office's authority.
“It is also telling that in IEEPA’s half century of existence, no president has invoked the statute to impose any tariffs, let alone tariffs of this magnitude and scope,” he wrote.
Mr Trump relied on IEEPA to unilaterally impose tariffs on China, Canada and Mexico – the US's three largest trading partners – last February over accusations that they did not do enough to halt the flow of fentanyl into the US.
Stocks gained following the Supreme Court's ruling and despite disappointing economic data earlier in the morning, with the Dow Jones Industrial Average up 74 points, or 0.1 per cent, the S&P 500 up 0.2 per cent, while the Nasdaq Composite rose 0.5 per cent.
Karl Schamotta, chief market strategist at Corpay, said the decision should reduce uncertainty for corporations and investors, and drive a "modest compression" in currency volatility.
"The threat of abrupt and unilateral changes in US tariff rates has been a persistent source of volatility premia in foreign exchange, particularly for export-sensitive currencies," he wrote to clients.
Mr Trump invoked the act on what he called Liberation Day last year, when he placed a universal 10 per cent tariff on almost all trading partners. The same day, he also imposed harsher “reciprocal tariffs” on dozens of other countries where the US had large trade deficits.
The April announcement brought a new era of uncertainty into the global outlook and threatened to rupture international trade norms, while also opening new points of tension between the US, its allies and its rivals.
The effective US tariff rate has jumped extensively since Mr Trump retook office in January 2025. The most recent estimate from Yale University's Budget lab said the average US tariff rate is 16.9 per cent today compared to 2.5 per cent last year.
Despite earlier fears of a global downturn, recent forecasting from the International Monetary Fund projected global growth to pick up at a 3.3 per cent pace this year, revised slightly upwards from its previous projection over the summer.
During arguments in November, the Supreme Court had appeared sceptical towards the legality of the tariffs, with Mr Roberts calling tariffs an “imposition of taxes” on Americans, which is under the power of Congress.
Refund 'mess'
The court's ruling also casts in question how the US will pay back revenue it collected from the tariffs. The administration now faces having to refund more than $133.5 billion in tariffs to importers, according to most recent data from the Customs and Border Protection agency.
Heading into the court's decision, it was unclear if the justices would order refunds or defer the issue to lower courts or the federal government.
Two questions that appeared unresolved were whether importers who paid the tariffs would be entitled a refund and, if so, what that process would look like.
And while the court ruled against Mr Trump's use of IEEPA powers, it declined to rule on the refund process. Justices struggled with the practicality of the refund process during November's arguments, with conservative justice Amy Coney Barrett saying it would be a "mess".
In his dissenting opinion, Justice Kavanaugh, another member of the court's conservative bloc, suggested the refund process could make the court's decision "substantial".
"The United States may be required to refund billions of dollars to importers who paid the IEEPA tariffs, even though some importers may have already passed on costs to consumers or others," he wrote.
Mr Trump himself had warned the challenges the court's decision would pose for businesses who might be entitled to refunds were the court to strike down his tariffs.
“It would take many years to figure out what number we are talking about and even, who, when, and where, to pay,” he wrote in a Truth Social post last month.
Canada and UK react
The Supreme Court's ruling reverberated throughout global politics, with some countries at the heart of Mr Trump's tariff saga reacting early to the news.
The UK, the first country to reach a trade deal with the US after Mr Trump's Liberation Day announcement, said it expects its "privileged trading position" with the US to continue, Reuters reported.
Canada's chamber of commerce said the country should prepare for different methods the US might use to impose tariffs, Reuters reported. Trade tension has caused a rift between the two countries since Mr Trump returned to office. A large majority of imports from Canada and Mexico have been exempt from Mr Trump's fentanyl-related tariffs because of the Canada-US-Mexico Agreement on free trade. That agreement is scheduled for joint review in the summer.
Meanwhile, the Swiss government said it will assess the specific effects of the tariff ruling, while Germany's chamber of commerce acknowledged the White House can impose tariffs through other avenues.
Trump's other options
While the Supreme Court's decision invalidates tariffs cited under IEEPA, it does not touch on sector-specific levies. However it does slow down the pace at which Mr Trump would be able to implement tariffs, as Treasury Secretary Scott Bessent suggested in November.
Still, Mr Trump's administration maintains there are alternative options on tariffs, which have been used for sectors such as aluminium, copper, steel, furniture and car parts.
For example, under Section 301, the White House can impose tariffs on products from a trading partner only after the US Trade Representative conducts an investigation and confirms unfair trading practices. Mr Trump's administration has thus far initiated Section 301 investigations into Brazil and China.
Mr Trump has framed the use of tariffs in existential terms, arguing they were essential for national security and would help boost domestic manufacturing.
His administration has also used the threat of tariffs to push for trade agreements with partners such as the European Union, South Korea, India and Japan. A deal with China remains elusive.
Despite the tariffs, the US trade deficit fell only modestly last year. Data released by the Commerce Department on Thursday showed the US ran a $901.5 billion trade deficit in 2025, a year-on-year decline of 0.2 per cent from 2024.
