The United States Supreme Court has delivered a significant blow to former President Donald Trump's aggressive economic agenda, ruling that his sweeping tariffs on most imported goods were illegal. In a 6-3 decision, the court determined that Trump overstepped his authority by using the International Emergency Economic Powers Act (IEEPA) – a law intended for national emergencies – to impose tariffs during peacetime. This landmark ruling marks the first time the court has overturned a major policy from Trump's second term, asserting that the power to levy taxes, including tariffs, rests solely with Congress as outlined in the Constitution. The court cited the "major questions doctrine," emphasizing that the executive branch cannot rely on ambiguous language to justify consequential actions, particularly concerning the core congressional power of the purse. Justices Sonia Sotomayor, Elena Kagan, Ketanji Brown Jackson, Chief Justice John Roberts, Neil Gorsuch, and Amy Coney Barrett voted to strike down the tariffs, while Justice Brett Kavanaugh penned a dissenting opinion suggesting Trump merely "checked the wrong statutory box."

Following the ruling, Trump vehemently criticized the justices, calling them "a disgrace to the nation." He promptly announced intentions to enact "very powerful alternatives," including a new 10% global baseline tariff under Section 122 of the Trade Act of 1974, which permits presidential tariffs for 150 days. Trump also declared plans to initiate investigations into unfair trading practices, potentially leading to permanent tariffs, claiming the court's decision clarified and empowered presidential trade authority.

The ruling has cast significant doubt over the viability of the EU-US trade deal, which was brokered last July by Commission President Ursula von der Leyen and President Trump. This agreement set a 15% blanket tariff on EU exports while eliminating duties on US industrial goods, a deal widely criticized as unbalanced. As part of this pact, Brussels also committed to purchasing $750 billion in US energy products through 2028 and investing $600 billion in strategic US sectors. The European Commission is now seeking urgent clarification from the White House regarding the implications for tariffs already paid by European companies – now deemed illegal – and future pledges. Bernd Lange, chair of the European Parliament's International Trade Committee, convened an extraordinary meeting, as EU lawmakers prepare to vote on implementing the deal, while simultaneously seeking amendments to allow for its termination in 2028 or suspension if Trump were to again threaten the EU's territorial integrity.

Similarly, Britain and other global trading partners are assessing the ramifications. The UK government, which had an earlier tariff deal with the US imposing 10% duties on British imports, is working to understand the impact while expecting its "privileged trading position" to continue. However, business groups on both sides of the Atlantic expressed "fresh uncertainty" for companies. The International Chambers of Commerce noted that while businesses might welcome the prospect of refunds for tariffs paid, the process would likely be "administratively complex" due to US import procedures. Experts cautioned that the White House could adopt an even more draconian approach, using the 1974 Trade Act to impose higher, broader product-based tariffs, potentially affecting sectors like computer chips and agriculture. It is important to note that the ruling does not affect sector-specific measures, such as the 50% tariffs currently imposed on steel and aluminum.

Economically, Trump's tariffs had collected approximately $200 billion from US consumers and businesses, adding significant costs, particularly for those sourcing goods from Asian countries like Vietnam, India, Japan, and China. Economists had repeatedly warned that these tariffs risked increasing prices for Americans amid heightened inflation. Senate Minority Leader Chuck Schumer hailed the decision as a "victory for the wallets of every American consumer," stating that Trump's "illegal tariff tax just collapsed." On financial markets, the UK’s FTSE 100 index saw a new intraday high, with exporters like Diageo and Burberry benefiting, and European carmakers like Stellantis also rising. Conversely, US government bond prices fell, increasing borrowing costs, and the dollar weakened slightly, reflecting anticipated loss of tariff income and potential refund liabilities. Mexico's president, Claudia Sheinbaum, also announced a review of the decision, highlighting Mexico's role as both the largest exporter to and buyer from the US, and the importance of maintaining trade agreements. Washington state, with its trade-dependent economy, had previously seen its governor warn of lasting harm from the tariffs. The Supreme Court's decision, while clarifying the limits of executive power in trade, introduces a new layer of complexity and unpredictability into global trade relations, as the US administration explores new avenues for its tariff policies and international partners grapple with the evolving landscape.