Although the Supreme Court ruled that President Donald Trump’s reciprocal tariffs were unlawful, there are predictions that there will be no significant international action to overturn trade agreements concluded with the United States.
According to the Financial Times (FT) on the 21st, international trade and legal experts analyzed that it is unlikely that governments will attempt to reverse trade agreements concluded with the Trump administration. Regardless of legal issues in the United States, these experts note that the Trump administration still holds leverage in international negotiations. The US holds absolute influence in non-trade areas such as defense and security cooperation. Furthermore, countries should keep in mind that the Trump administration possesses the means to retaliate in the trade sector.
The Supreme Court’s ruling was limited to tariffs imposed under the International Emergency Economic Powers Act (IEEPA). Tariffs on specific products, such as automobiles, steel, semiconductors, and medical supplies, based on Section 232 of the Trade Expansion Act and Section 301 of the Trade Act remain in effect. Ultimately, this means that the Trump administration could retaliate against countries attempting to reverse trade agreements with the US by imposing high tariffs on key industries like automobiles. Therefore, experts generally believe that trade agreements with countries whose key industries are at risk of retaliation, such as the European Union (EU), Japan, and South Korea, are unlikely to result in renegotiation or termination.
The European Parliament is scheduled to discuss whether to postpone the ratification of the trade agreement with the US, but given the security situation, including the war in Ukraine and the impact on the auto industry, it is unlikely to escalate into a full-scale review. Simon Evernet, a professor at the International Institute for Management Development (IMD) in Switzerland, said the U.S. Supreme Court ruling did not weaken the Trump administration’s threat, but merely replaced it with another threat. He argued that concerns that the Trump administration could impose higher tariffs after 150 days still weigh on negotiating partners.
Immediately following the Supreme Court ruling the previous day, President Trump reimposed a 10% tariff on all Chinese imports under Section 122 of the Trade Act and announced a day later that he would increase it to 15%. This measure remains in effect for 150 days without further congressional approval. However, some countries may seek to leverage the Supreme Court ruling in negotiations with the Trump administration.
Pratik Dattani, founder of the think tank Bridge India, predicted, “This ruling will enhance the negotiating power of trading partners like India.” He argued that India may slow down negotiations to await not only the Supreme Court ruling but also the shift in power in the U.S. Congress following the midterm elections in November. India is currently in further negotiations following the interim trade agreement reached with the United States earlier this month. However, President Trump also insisted that “nothing has changed” regarding the trade agreement with India.