The U.S. Supreme Court delivered a final ruling that reciprocal tariffs imposed by President Donald Trump on countries worldwide are illegal. The decision has thrown global trade relations and financial markets into turmoil.
Countries with trade agreements, including South Korea, now face invalidated deals based on reciprocal tariff reductions and must renegotiate. Tariff refunds owed to countries worldwide are expected to exceed 250 trillion won ($175 billion).
With the U.S. midterm elections approaching on November 3, Trump shows no signs of backing down. He announced he will sign an executive order imposing an additional 10% tariff on all countries under Section 122 of the Trade Act.
South Korea, which had been exploring additional negotiations after Trump threatened to raise reciprocal tariffs from 15% to 25%, will likely adopt a wait-and-see approach. Diplomatic sources expect Seoul to buy time by observing how the European Union, Japan, Taiwan, and China respond to the ruling.
Supreme Court: "Trump Lacks Authority to Impose Reciprocal Tariffs"
The Supreme Court ruled on the 20th (local time) that the International Emergency Economic Powers Act (IEEPA) does not grant the president tariff-imposing authority, handing the Trump administration a defeat.
The case originated when Trump designated chronic large-scale trade deficits as a grave threat to national security and the economy on April 2 last year, imposing reciprocal tariffs under IEEPA. Five small businesses, including wine importers harmed by the tariffs, filed suit against the administration in the U.S. Court of International Trade on April 14. Oregon and 11 other states joined the legal battle on April 23.
IEEPA, enacted in 1977, has primarily been used for sanctions and asset freezes against adversarial nations. Trump became the first leader to use IEEPA to impose tariffs citing trade deficits, manufacturing competitiveness, and drug smuggling.
Lower courts in May and August ruled that "exclusive authority to impose tariffs belongs to Congress" and ordered the reciprocal tariffs withdrawn. During Supreme Court arguments on November 5, justices across the political spectrum questioned the tariffs' legality.
The court split 6-3 on the ruling. Despite a 6-3 conservative-liberal composition considered favorable to the Trump administration, liberal justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson all supported the plaintiffs. Three conservatives—Chief Justice John Roberts, Neil Gorsuch, and Amy Coney Barrett—also ruled against Trump. Only Samuel Alito, Clarence Thomas, and Brett Kavanaugh sided with the administration.
The ruling covers reciprocal tariffs under IEEPA and tariffs on China, Canada, and Mexico imposed in February last year to combat fentanyl trafficking. The administration argued IEEPA's import regulation authority includes tariffs, but the court rejected this interpretation.
The court applied the "major questions doctrine," which holds that agencies cannot unilaterally decide policies with significant economic and political impact without explicit congressional authorization. The court previously applied this doctrine to block Biden administration policies including student loan forgiveness.
"The Framers gave the power to impose peacetime tariffs to Congress alone," the court stated. "The president must demonstrate clear congressional authorization to justify such extraordinary exercise of power."
$175 Billion in Refunds Expected; Trump Announces 10% Additional Tariffs
The ruling is expected to trigger a wave of refund lawsuits from U.S. and foreign companies that paid tariffs. The court did not address refund procedures, leaving potential confusion for lower courts.
Several companies have already filed refund suits based on lower court rulings. According to Chinese financial outlet Caijing, four U.S. subsidiaries of BYD, the world's largest EV manufacturer, filed suit in late last month.
Justice Kavanaugh wrote in his dissent: "There was no mention of whether the government must return billions of dollars or how. The process will be a mess."
Reuters cited economists at the University of Pennsylvania's Penn-Wharton Budget Model predicting refund claims will reach $175 billion (approximately 254 trillion won).
According to CNN, Trump learned of the ruling during a breakfast meeting with governors at the White House. He called it "a disgrace" and said he had a "backup plan."
Three hours later, Trump held an emergency press conference announcing he would immediately sign an executive order imposing 10% additional tariffs worldwide under Section 122 of the Trade Act. He said the tariffs would take effect in three days.
"I'm very disappointed in this terrible decision," Trump said. "The good news is we have stronger tools, methods, laws, and authority than tariffs under IEEPA."
"Other countries that have ripped us off for years are ecstatic and dancing in the streets," Trump added. "But they won't be dancing for long."
Trump cited multiple legal authorities as alternatives to IEEPA, including Section 232 of the Trade Expansion Act and Sections 122, 201, and 301 of the Trade Act.