ABN AMRO economists Rogier Quaidwillig, Arjen van Dijkhuizen, and Bill Diviney analyze how the US Supreme Court’s strikedown of IEEPA-based tariffs modestly reduces overall US tariff levels, while leaving them historically high. They emphasize that Section 122 and regional tools such as Sections 232 and 301 will be used to reframe tariffs, which will have limited impact on US growth, inflation and fiscal trajectories in their base case.
Supreme Court decision puts curbs on tariff powers
“After a surprisingly long delay, the Supreme Court ruled 6-3 last Friday that the International Emergency Economic Powers Act (IEEPA) does not give the President the authority to impose tariffs. Importantly, he referred the decision to whether the more than $160 billion in unpaid tariffs should be returned to lower courts. The Trump administration hastened to reimpose the tariffs in other ways.”
“The impact on the fiscal picture will be limited. Our base case already saw tariff reductions this year now materializing. Paying off last year’s tariffs will again widen this year’s deficit, but is unlikely to qualitatively change the overall US debt trajectory.”
“We also do not expect any significant impact on inflation. Overall overall tariff levels remain at historically high levels. Even if businesses get tariff refunds, they are unlikely to pass on that fiscal windfall to final consumers.”
“Section 122 again provides a legally dubious basis for the tariffs. Formally, it was written to prevent international payments problems in a fixed exchange rate arrangement. Given the precedent in the IEEPA tariffs, it is unlikely that a legal challenge, which is certain, will be concluded before the 150-day period expires.”
“Meanwhile, the Trump administration is expected to adopt sector-level Section 232 and ‘unfair foreign trade practices’ Section 301 to make the tariffs permanent and more legally reworked. Both require expanded scrutiny before being implemented. The Liberation Day packages cannot be used to completely rework the tariffs because they do not allow for broad universal tariffs, but an expanded effort could come close.”
(This article was created with the help of an artificial intelligence tool and reviewed by an editor.)
