In a swift reversal of fortune, the countries that had been hardest hit by US President Donald Trump’s tariffs emerged as the biggest winners from the Supreme Court’s decision to overturn his emergency levies.
China, India, and Brazil are among the countries now facing lower tariff rates on their shipments to the United States after the highest court ruled that Trump’s use of the International Emergency Economic Powers Act to impose tariffs was illegal. While Trump subsequently announced plans for a flat 15% rate, Bloomberg Economics calculated that this would imply an average effective tariff rate of around 12%, the lowest since his “Liberation Day” tariffs were announced in April.
For Asia, Morgan Stanley economists estimate that the weighted average tariff rate will fall from 20% to 17% and that average levies on goods from China will drop from 32% to 24%. The relief could be temporary, as the Trump administration seeks to impose sectoral and economy-specific tariffs to rebuild its tariff regime.
Even so, “the peak of uncertainty over tariffs and trade tensions is behind us,” Morgan Stanley economists led by Chetan Ahya wrote in a note.
The new general duty effectively restores a level playing field for U.S. trading partners. For countries such as China, which also successfully challenged a 10% duty on fentanyl in court, exports now face less punitive rates. Among the losers are economies such as the United Kingdom and Australia, which had negotiated lower than 10% levies under the old “reciprocal” framework.
Senior US officials are pressuring partners such as the European Union and Japan to uphold commitments made in previous negotiations. They are also seeking to extend the one-year truce with China, while Trump plans to visit Beijing soon to meet with President Xi Jinping. China, in the midst of a long holiday, has not yet officially commented on the Supreme Court’s decision.
“We want to make sure China is fulfilling its part of the agreement,” U.S. Trade Representative Jamieson Greer told Fox News on Sunday. “That means continuing to buy the products they said they would buy.”
Canada and Mexico also faced tariffs related to fentanyl, so they benefit from their removal. If the exemptions under the trade agreement between the US, Mexico, and Canada (USMCA) remain in place, they will be in a “very favorable position,” wrote Bloomberg Economics analysts Nicole Gorton-Caratelli, Chris Kennedy, and Maeva Cousin in a note.
The new 15% tax hurts countries that previously had a 10% rate, such as Australia and the United Kingdom. Meanwhile, those that previously had a competitive 15% rate applied to their exports—such as Japan—have seen that advantage disappear.
Although the court ruling adds a new layer of uncertainty, analysts highlight the resilience of global trade over the past year and the relatively minor change in the overall average tariff rate, suggesting that the short-term effects may be limited.
Economists at Goldman Sachs Group Inc., including David Mericle, estimate that the combination of the Supreme Court ruling and the recently announced Section 122 tariff will reduce the increase in the effective tariff rate from the beginning of 2025 from just over 10 percentage points to 9 percentage points.
“Imports from countries that will experience significant tariff reductions as a result of the latest policy changes are likely to increase in the coming months,” the economists wrote. “But the impact on GDP should be largely offset by higher inventory accumulation and consumption, lower imports from other countries through which trade had been diverted, and small reductions in imports from countries whose tariff rates have increased.”
Source: Bloomberg.com
