Trump insists trade deals will hold after Supreme Court ruling, but partners aren’t so sure

President Donald Trump defended his tariff agenda in his State of the Union address on Tuesday; The Supreme Court’s decision to drop emergency tariffs has sparked fresh confusion over a range of trade deals being negotiated with global partners.

The court ruled Friday that the president overstepped his authority under the International Emergency Economic Powers Act (IEEPA) by imposing tariffs on goods from nearly every country in the world. Trump said he plans to do so again within the limits of the law.

Immediately afterwards, Trump replaced this with a 10% tariff under Article 122 of the Treaty. Commercial Code 1974 It came into force on Tuesday. He had also threatened to increase tariffs to 15% under Section 122, but it is unclear when these would come into force.

The decision raised questions about bilateral trade agreements structured around IEEPA tariff rates, prompting foreign governments to reassess their positions.

“[Trading partners] It made concessions in exchange for specific tariff application based on IEEPA. This legal basis no longer exists,” said Johannes Fritz, CEO of the St.Gallen Foundation for Prosperity through Business.

“Whether the administration can restructure these agreements under Section 301 or other authorities remains to be seen, but that will take time and new legal processes,” Fritz added.

Section 301 of the Trade Act of 1974 requires the U.S. Trade Representative to conduct a formal trade investigation into unfair trade practices before imposing tariffs.

“Countries that made deals with the US early after last year’s Independence Day tariffs were kind of left holding the bag,” Sarang Shidore, director of the Quincy Institute’s Global South Program, told CNBC’s “Inside India” on Monday. he said.

“Whereas other countries like Brazil and others that have resisted accepting any U.S. demands may feel a little more justified,” he added.

Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis, said countries that did not negotiate tariff cuts could now benefit more.

He cited Japan, which last year secured a deal that reduced mutual tariffs to 15% in exchange for a promise of $550 billion in investment.

“They (Japan) are now paying to be treated the same as everyone else,” Herrero said after the court decision upended Trump’s tariff agenda.

Minister of Commerce of Japan Ryosei Akazawa said On Tuesday, he urged Washington not to treat Japan less favorably than it did in last year’s trade deal, saying 10% universal tariffs could impose “additional tariffs on some goods.”

India paused plans to finalize an interim trade deal just days before a trip to Washington DC. On Tuesday, Indian minister Piyush Goyal said his country would resume talks as soon as possible. There is more clarity.

On Monday, the European Parliament postponed for a second time a vote on the trade deal that would impose a 15% U.S. tariff rate on most EU goods and eliminate European tariffs on many American imports, including industrial goods.

Bernd Lange, who chairs the European Parliament’s international trade committee, told CNBC on Tuesday that the United States had violated the terms of the agreement and the bloc was ready to retaliate if necessary. European officials have expressed concern about the latest tax, suggesting it could threaten the trade deal signed last summer.

EU lawmakers are expected to meet again on March 4 to consider whether Washington has clarified its position and commitment to last year’s deal.

French President Emmanuel Macron praised the court decision, saying, “In democracies, it is good to have power and counterweights to power.”

Canada also welcomed the decision, while regional leaders in British Columbia and Ontario called it a positive step. Doug Ford, Premier of Ontario, Canada’s most populous province, in question Trump was told on Monday that “the walls are coming” and that no deal is better than a bad deal.

Trump warned countries not to back away from previous agreements, saying any country willing to “play the game” would face much higher duties under different trade laws.

In a post on Truth Social on Monday, Trump said he could also impose licensing fees on trading partners. U.S. Trade Representative Jamieson Greer also said the Trump administration expects to open new Section 301 investigations against many countries, a legal step that could pave the way for new tariffs.

Most foreign leaders appear to be in a cautious wait-and-see mode, reevaluating their positions and timing for renegotiating some of the terms of their deals, given the more limited tariff threats Trump can now credibly make.

Mexican President Claudia Sheinbaum said her government would carefully review the court’s decision to assess its scope and impact.

A spokesman for China’s Ministry of Commerce said on Tuesday that an “honest discussion” would be held in the next round of bilateral talks during Trump’s planned visit at the end of next month.

Beijing said it would “comprehensively evaluate” any developments from Washington and decide whether to adjust its countermeasures against reciprocal and fentanyl-related tariffs imposed by the United States.

As foreign governments weigh their responses, attention turns to the options available to the White House.

With the elimination of tariffs under IEEPA, the administration is exploring alternative legal avenues to protect its trade agenda.

But creating an alternative plan will take time, meaning confusion over tariffs The pressure on the global economy may continue.