Could tariffs go still higher despite the Supreme Court ruling?
The Trump administration has other ways to keep tariffs high—if the president has the patience for the bureaucracy involved.
The Supreme Court’s tariff decision doesn’t impact our forecasts much for now—not only because it had been widely expected, but also because the impact of the ruling may be negated by the use of an alternative statute to keep tariffs high. Perhaps the more important news is that President Donald Trump, incensed by the court’s decision, may end up pushing tariffs even higher than before.
The Supreme Court decided to strike down the bulk of Trump’s 2025 tariff hikes, but we had already incorporated a 75% probability that this would happen. Our view was in line with prediction markets, which in recent months had placed a 70%-80% probability on this outcome. This also explains the subdued reaction from financial markets to the news.
The real action is yet to come. The impact of the court’s decision hinges on the Trump administration’s desire and ability to use some other statutory authority to levy new tariffs to replace those that were struck down. While we expect average tariff rates to decline slightly, that’s not guaranteed.
A still-higher tariff scenario emerges
Indeed, in his first remarks following the court’s ruling, Trump announced a new 10% global tariff hike under Section 122 authority. This will be a stopgap, as Section 122 only permits tariffs lasting 150 days without congressional authorization. But over the next several months, the Trump administration will prepare Section 301 investigations to authorize substantial tariff hikes across a slew of countries. Section 301 tariffs last indefinitely.
Paradoxically, there’s even a credible scenario wherein tariffs end up higher because of this decision. Trump appeared indignant at the court’s decision and galvanized in his commitment to keep tariffs high, saying that tariff protection ”will actually increase because of this decision.” Curiously, he also suggested that he had been holding off on further escalation in recent months because he “didn’t want to do anything that would affect the decision of the court.”
How section 232 and 301 tariffs work
Further details on Section 301 investigations will be released in the coming days and weeks, according to US trade representative Jamieson Greer. It’s also possible we’ll see new tariff hikes via Section 232 authority, which tends to be used for specific product categories. Semiconductors and pharmaceuticals have been cited as potential targets.
According to the Yale Budget Lab, the average stated tariff rate on US imports had increased a cumulative 14.5% from the start of Trump’s second term until the day of the Supreme Court’s ruling. As a result of the decision, that cumulative hike falls by 7.8 percentage points to 6.7%. The court has struck down all tariffs under the 1977 International Emergency Economic Powers Act, which was cited to enact country-wide 10%-20% hikes on most trading partners. All other tariff-hiking authority was untouched by the decision. Most of the remaining 6.7% hike comes from the use of Section 232 authority to levy tariffs on autos, steel, and other goods.
The Trump administration has not provided any details on the new Section 122 10% baseline tariff. But obviously, a 10% blanket tariff could more than offset the 7.8-percentage-point reduction rendered by the court’s decision. There will likely be heavy exemptions, such as those which allowed Mexico and Canada to avoid paying almost all of their stated IEEPA tariff hikes. But even lopping off several percentage points for exemptions, it’s likely that average tariff rates will remain approximately unchanged for the next 150 days while Section 122 tariffs are in force.
As for what Section 301 tariff hikes will amount to, that’s anyone’s guess. During Trump’s first term, average tariff rates on China climbed by over 15% under Section 301 authority. It’s plausible they could’ve gone much higher. On the other hand, the Section 301 case against China was relatively easy, thanks to China’s unique economic practices, including heavy state intervention in the economy and attested widespread intellectual property theft. Levying massive tariff hikes on other countries using Section 301 would be less justifiable and could see legal challenge.
Altogether, however, a combination of Section 301 and Section 232 authority could enable a cumulative tariff hike (of indefinite duration) exceeding the IEEPA tariffs struck down by the Supreme Court. Whether this happens depends as much on Trump’s personal desires as it does on the legal dimensions of the issue. Without IEEPA, Trump will be unable to slap new tariffs in place with instant gratification. Section 301 and Section 232 authority require lengthy investigations over many months. It’s possible his interest will falter over the course of this administrative slog.
