Supreme Court Ruling Complicates Trump’s Tariff Strategy: Moody’s Analytics

The US Supreme Court’s decision to strike down President Donald Trump's tariffs imposed under the International Emergency Economic Powers Act has injected a fresh layer of uncertainty into the global trade environment, according to Moody’s Analytics.

In a note assessing the implications of the ruling, Gaurav Ganguly, Head of International Economics at Moody’s Analytics, said the judgment may initially be welcomed by US trading partners. Relief, though, could prove short-lived.

The Court’s decision constrains the executive branch’s use of emergency powers to impose broad-based tariffs, raising questions about the durability of recent US trade measures and the legal architecture underpinning them. Since returning to the office, President Trump has leaned heavily on expansive interpretations of emergency authority to pursue trade objectives, including the imposition of sweeping tariffs framed as responses to economic or national security threats.

According to Moody’s Analytics, the administration is unlikely to abandon its tariff strategy. Instead, it may pivot toward alternative statutory mechanisms to sustain, or even escalate, trade barriers. Among the possibilities under discussion is a prospective 15% global tariff rate, which could be pursued under different legislative authorities that are less vulnerable to judicial reversal.

For US exporters and importers, the ruling introduces operational as well as financial complications. Firms that have already paid tariffs under the invalidated measures may seek reimbursement from the federal government. Moody’s Analytics cautions that any large-scale compensation process could become contentious, legally complex, and fiscally material. The mechanics of refunding duties, recalculating liabilities, and resolving disputes would likely unfold over months, if not years.

The international ramifications are equally nuanced.

Countries that have recently concluded trade arrangements with Washington are unlikely to repudiate those deals immediately. Doing so would expose them to the risk of renewed or even more punitive tariffs should the administration secure alternative legal pathways. The more probable response, Moody’s Analytics argues, is a deliberate slowing of ratification and implementation. Such a strategy allows governments to preserve diplomatic space while assessing the durability of US policy.

Even that cautious approach carries risk. South Korea’s earlier experience navigating shifting US tariff threats illustrates how quickly negotiated understandings can be revisited or revised under political pressure.

China, which has not concluded a comprehensive trade agreement with Washington, may interpret the ruling as strengthening its leverage. If the executive branch’s room for unilateral tariff escalation narrows, Beijing’s bargaining position improves at the margin. The European Union may reach a similar conclusion, potentially hardening its stance in ongoing or future negotiations.

The broader economic effect lies less in the immediate tariff changes and more in the signal the ruling sends about policy unpredictability. Trade flows, investment decisions, and supply-chain configurations depend heavily on the perceived stability of the rules governing cross-border commerce. A legal setback to one strategy does not necessarily imply de-escalation; it may instead trigger a shift to different instruments.

Moody’s Analytics emphasises that the decision does not eliminate tariff risk. Rather, it redistributes it, from a narrow legal channel to a broader policy debate over executive authority and trade strategy.