After President Donald Trump took office, the U.S. Supreme Court ruled illegal the "reciprocal tariff" the United States has imposed on major trading partners, including Korea. With the Trump administration's core trade policy losing its legal basis, uncertainty in the global trade market is expected to rise. Trump said he would look for other ways to impose tariffs.
On the 20th, U.S. time, the Supreme Court ruled that Trump's across-the-board imposition of reciprocal tariffs based on the International Emergency Economic Powers Act (IEEPA), which was created for use in national emergencies, is illegal. The court held that the International Emergency Economic Powers Act does not grant the president authority to impose tariffs and that levying taxes is a power of Congress.
The U.S. Supreme Court is composed of nine justices. Six justices viewed the reciprocal tariff as illegal, and three deemed it legal. The current makeup is six conservatives and three liberals, giving conservatives a solid majority. Conservative Chief Justice John Roberts and Justices Neil Gorsuch and Amy Coney Barrett, and liberal Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson found the reciprocal tariff illegal. Conservative Justices Clarence Thomas, Samuel Alito, and Brett Kavanaugh viewed it as legal.
Among the justices appointed by Trump, Justices Gorsuch and Barrett found the reciprocal tariff illegal, while Justice Kavanaugh found it legal. Conservative Chief Justice John Roberts said, "Imposing tariffs is an inherent power of Congress, and the president failed to provide a clear basis to justify it."
The court also found that Trump's imposition of tariffs under the International Emergency Economic Powers Act not only infringes on Congress' authority but violates the "major questions" doctrine. This doctrine holds that when the executive branch takes actions of "vast economic and political significance," it must obtain clear authorization from Congress. Citing the major questions doctrine, the U.S. Supreme Court ruled illegal former President Joe Biden's attempt to forgive $430 billion (about 560 trillion won) in student loans on the grounds of the COVID-19 crisis.
Earlier, on Apr. 2 last year, Trump declared a national emergency, arguing that America's chronic, large trade deficit and the illegal inflow of drugs (fentanyl) across the border were "national security threats." He then imposed reciprocal tariffs on U.S. trading partners based on the International Emergency Economic Powers Act.
In response, five U.S. small and mid-sized trading companies and 12 states with Democratic governors filed lawsuits, saying Trump's reciprocal tariff was illegal and unconstitutional. Trump lost in the first and second trials and ultimately at the Supreme Court.
With this ruling, the 10% base tariff and country-by-country reciprocal tariffs that Trump pushed through by declaring a national emergency to reduce the trade deficit have lost their legal foundation. Entering the second year of his second term, Trump is expected to suffer significant political damage as his tariff policy is blocked by the judiciary.
In particular, experts say the Trump administration will have to return the astronomical tariff revenues collected under the IEEPA to corporations. This is expected to put considerable pressure on U.S. fiscal management. Reuters estimated that tariff revenue collected through the reciprocal tariff will reach about $175 billion (about 250 trillion won).
Trump pushed back immediately, signaling the activation of so-called "Game Two." The White House and the Treasury Department plan to maintain tariffs by invoking other legal provisions, such as national security threats or retaliation for unfair trade. But the consensus is that it will be difficult to achieve the powerful and immediate effect of the IEEPA.
The calculus has also become complicated for major countries including Korea that pledged large-scale investments in the United States to avoid high tariffs. As deals struck to avoid illegal tariffs face the risk of becoming meaningless, diplomatic friction over possible renegotiation or nullification of existing trade agreements appears inevitable.