ANALYSIS: Trump Defeated by His Own Supreme Court — What Remains in the Tariff Arsenal and Why It Changes Everything

A real tool, but one with drastic limitations

Faced with the invalidation of the IEEPA, Trump didn’t waste a single second. He immediately invoked Section 122 of the Trade Act of 1974 to announce new 15% tariffs on all global imports. This provision has been in place for fifty years and is less well known than the IEEPA—but it is real, and it does indeed give the president the power to act without going through Congress. Except that the conditions are infinitely more restrictive. Section 122 is intended for very specific situations: it allows for the imposition of a maximum tariff surcharge of 15% for a maximum period of 150 days, in cases where “fundamental problems with international payments require special measures to restrict imports.”

In practical terms: Trump cannot exceed 15%. The measure cannot last longer than five months. And most importantly, he must demonstrate that the United States is facing a “fundamental problem with international payments”—a severe balance of payments deficit or an imminent depreciation of the dollar. Yet no serious observer believes the United States is in that situation today. Demand for U.S. Treasury bonds remains robust. The dollar is stable. The United States has not lost access to international capital markets. The legal conditions of Section 122 simply do not appear to be met.

A Legal Challenge Is Almost Certain

Gita Gopinath, former Deputy Managing Director of the International Monetary Fund until August 2025, did not mince words on the social media platform X: “As a former IMF official, I would say that the United States does not have a fundamental problem with international payments. A balance-of-payments problem arises when a country loses access to a market or is on the verge of losing it. As long as demand for U.S. debt securities and stocks remains strong—which is currently the case—the United States does not face a payment problem.” This is an explosive statement. One of the most respected voices in the global economy is essentially saying: Trump is invoking a crisis that does not exist.

Economist Brad Setser, widely followed for his analyses of capital flows, is more cautious in his wording but reaches the same practical conclusion: he says he is “certain that the issue of a ‘fundamental international payments problem’ will be the subject of litigation.” In other words, Section 122 will be challenged in court. Probably soon. And the outcome is uncertain. Trump has found a Band-Aid solution. But the Band-Aid risks coming off before the 150 days are even up.

There is something absurd—and revealing—about the fact that Trump has to claim the United States is in a balance-of-payments crisis to justify his tariffs. The U.S. economy is the most powerful in the world. The dollar is the global reserve currency. Invoking a financial emergency that does not exist to circumvent the Constitution… is either a profound ignorance of the law or a deliberate disregard for institutions. In either case, it is troubling.

Section 232: National Security as a Justification for Tariffs

Scott Bessent, one of Trump’s close advisors and Secretary of the Treasury, himself acknowledged on CNN that Section 122 is “likely a five-month transitional measure,” giving time to conduct the studies required under Sections 232 and 301. This is a significant revelation. It means that even within Trump’s inner circle, it is understood that the new 15% tariffs are temporary. And that the next battle will be fought under the auspices of two other laws. The first is Section 232 of the Trade Expansion Act of 1962. It allows the president to impose tariffs if certain imports threaten national security. This is the mechanism used for the 50% surcharges still in effect on European steel and aluminum. A powerful tool, then. But one with a major flaw for an administration that operates on a day-to-day basis.

As economist Éric Dor explains in an analysis note: “However, this requires a fairly lengthy investigation by the Department of Commerce before tariff increases can be decided. That’s up to 270 days for the investigation and 90 days for the decision. ” That’s potentially a year of proceedings before the first tariffs can be legally imposed. A year during which markets remain in a state of uncertainty. A year during which trading partners can reposition themselves. A year that, for a Trump administration that operates at the pace of tweets and press conferences, feels like an eternity.

Section 301: Proving Bad Faith on the Part of Trading Partners

Section 301 of the Trade Act of 1974 is the other avenue being considered. It allows the president to take action if a trading partner violates an international agreement or engages in “unjustifiable, unreasonable, or discriminatory” practices. In practical terms, this requires the administration to prove that the partner in question is acting improperly—which entails an investigation, evidence, and a rigorous legal process. And here, the problem is as much political as it is legal. Take the European Union: it strictly enforces World Trade Organization rules. While its trade practices are far from perfect, accusing Brussels of being “unjustifiable” or “absurd” would require a solid case that the Trump administration would struggle to build.

“It would be very difficult, for example, to accuse the EU—which strictly enforces WTO rules—of such practices,” confirms Éric Dor. And this is where Trump’s tariff strategy begins to run up against its own limits. When you can no longer invoke urgency, when you have to prove your partner’s guilt, when proceedings drag on for months… the trade war takes on a different character. It becomes less of a lightning-fast assault and more of an exhausting legal guerrilla war, with an uncertain outcome, costly for everyone.

I’m thinking of all those small and medium-sized businesses—in Quebec, France, Belgium, and Germany—that export to the United States and have been navigating this fog for the past two years. People who have jobs, families, and loans to pay off, and who don’t know whether their products will be taxed at 10%, 15%, 25%, or zero in six months. This uncertainty isn’t abstract. It’s destroying plans, paralyzing investments, and forcing layoffs. And meanwhile, experts are debating Section 232 versus Section 301 in air-conditioned seminar rooms. The gap between the theory and the human reality of all this is staggering.

A Republican majority that refuses to comply

There is a simple solution, in theory, to all these legal problems: for Congress to pass a law explicitly authorizing Trump to impose whatever tariffs he wishes. Congress constitutionally holds this power. If it clearly and explicitly delegates this authority to the president, the legal challenges would collapse. The problem is that the U.S. Congress—despite having a Republican majority in both chambers—has been strangely reluctant to take this step. Several Republican senators and representatives have expressed reservations about the tariff policy, concerned about its effects on inflation, on farmers in their states, and on manufacturing companies that rely on imported parts.

This internal resistance is significant. It reveals a rift within the Republican Party between the Trump camp—for whom tariffs are both an economic weapon and a political symbol—and elected officials who must answer to their constituents for the concrete consequences of this policy. An Iowa farmer who is losing his Chinese export markets due to retaliatory tariffs does not see tariffs as a patriotic victory. He sees losses. And his elected representative knows it.

Delegation of Power: An Explosive Constitutional Legacy

There is a historical paradox in the current situation. For decades, the U.S. Congress has gradually delegated its trade powers to the executive branch, believing it would create diplomatic flexibility. Successive presidents have been granted increasingly broad authority to negotiate trade agreements, respond to unfair practices, and protect strategic industries. This delegation of power has created the monster we see today: a president who wields a vast legal arsenal, but whose constitutional legitimacy is increasingly challenged by the courts.

The Supreme Court’s decision on the IEEPA may mark the beginning of a shift toward recentralizing trade authority back to Congress. If the courts continue to invalidate the president’s unilateral use of tariff policy, lawmakers will have no choice but to legislate themselves—a democratic process that is much slower and more contentious, but also far more legitimate. The question is whether the Republican-controlled Congress will have the political courage to shoulder its responsibilities, or whether it will continue to let Trump go it alone in his tariff adventures.

We don’t talk enough about Congress in this story. We talk about Trump, the Supreme Court, and trading partners. But Congress—that chamber supposed to represent the American people—is just sitting there, watching the executive branch run amok with the tools it has itself given him. And it isn’t taking action. Neither to support Trump by passing the necessary laws, nor to rein him in by reclaiming its powers. This institutional paralysis is, in its own way, just as troubling as the tariffs themselves.

Uncertainty as an Economic Poison

Christine Lagarde, president of the European Central Bank, put it simply on CBS: “Shaking everything up again will certainly cause disruptions.” That’s a polite euphemism for something far more corrosive. Economists have known this for a long time: when it comes to economic investment, uncertainty is often more destructive than negative certainty. A company can adapt to a permanent 25% tariff. It can switch suppliers, reconfigure its supply chains, pass on the costs, or absorb the losses. What it cannot do is plan ahead when the rules change every week.

Bernard Yaros, an economist for the United States at Oxford Economics, quoted by Reuters, takes the analysis a step further: “Even if the administration replicates the overall level of tariffs through other means, the implications by sector and by country could end up being very different, creating a new wave of uncertainty regarding trade policy for businesses, investors, and households.” ” What he highlights is crucial. It’s not just the level of tariffs that matters. It’s their structure—which countries, which sectors, which goods. And this structure, as it shifts from the IEEPA to Sections 232 and 301, could change radically, creating unexpected winners and losers.

China Wins, Europe and Canada Lose

The initial effects of this shift are already visible. With the new 15% tariffs under Section 122, the geopolitical structure of the tariffs is changing. China, which had already been subject to massive, targeted surcharges under the IEEPA, now finds itself in a relatively less disadvantageous position compared to the European Union and the United Kingdom, whose relative situation has deteriorated. It’s paradoxical: Trump, who presents himself as the great critic of Chinese trade policy, ends up creating a context in which Beijing emerges as the relative winner of a U.S. decision.

For partners such as Canada, the European Union, Mexico, and Japan, Trump’s scrapping of the IEEPA paradoxically represents an opportunity. When the tool for instant threats disappears, the dynamics of negotiation change. Partners no longer have to fear that a “lightning tariff” will drop out of the blue at 6 a.m. on Twitter. They can take the time to negotiate, set conditions, and build coalitions. As John Plassard notes: “This shifts the balance in discussions with trading partners.” A balance that, for the first time in two years, is tilting slightly less in Washington’s favor.

I want us to pause for a second to consider what it really means that China is the big winner of the U.S. Supreme Court’s decision. It is one of the cruelest ironies of this saga. Trump spent years demonizing Beijing, promising to crush it economically, and making it the number one enemy in his trade rhetoric. And the decision by his own Supreme Court ends up improving China’s relative position. Geopolitics sometimes has a particularly dark sense of humor.

A Real but Cumbersome Legal Arsenal

To be precise and fair, we must acknowledge that Trump is not defenseless. He still has a substantial legal arsenal at his disposal. In addition to Sections 232 and 301, Éric Dor cites Section 201 of the 1962 Act and Section 338 of a 1930 Act. These are existing tools that are constitutionally valid and allow for the imposition of significant tariffs. The fundamental difference from the IEEPA lies in the time required and the procedural complexity. Each tool requires investigations, justifications, and deadlines. 270 days for the Section 232 investigation. Months of litigation for Section 301. An uncertain congressional process for a direct congressional bill.

John Plassard found the perfect way to sum up this situation: “The toolbox is full, but the tools are heavier, noisier, and less immediate, which changes the market dynamics: less immediate, sudden shock, but more procedural noise spread out over time.” That’s exactly it. The era of lightning-fast trade wars may be over. What’s beginning now is a war of attrition—longer, more complex, but also potentially more damaging because it drags on and constantly fuels uncertainty.

The Hidden Cost of Delays

There is a real economic cost to this procedural slowness that macroeconomic analyses fail to capture adequately. During the 270 days of the Section 232 investigation, during the months of litigation over Section 301, during the 150 days of Section 122… tens of thousands of companies on both sides of the Atlantic remain in limbo. Contracts go unsigned. Investments are put on hold. Production lines remain idle. Jobs are not created. This is what economists call the “uncertainty shock”—and it can be just as devastating as a direct tariff shock, sometimes even more so, because it lasts longer and is harder to quantify and counteract.

For exporting SMEs—those mid-sized companies that lack the resources of multinationals to hedge against tariff risk—this uncertainty is particularly harsh. A large company may have dedicated legal teams monitoring developments under Sections 232 and 301. It can afford sophisticated financial hedges against currency and tariff risk. A Quebec SME with fifty employees that exports manufactured parts to the United States? It watches the news, tries to make sense of it, and holds its breath.

That’s what really upsets me. Not the grand speeches about trade sovereignty or the U.S. trade deficit. What upsets me is the business owner in Sherbrooke, Toulouse, or Liège, who has built their business over twenty years, employs fifty people, and doesn’t know whether their product will be taxed at 15% or 25% in three months. This person isn’t just a statistic in an Oxford Economics report. They have a name, a family, and employees who depend on them. And their life is put on hold by decisions made at 6 a.m. on a social media platform in Washington.

A Shift in the Balance of Power

Trump’s repeal of the IEEPA structurally alters the balance of power in global trade negotiations. To understand why, we must consider the impact the threat of an immediate tariff hike had on Washington’s partners. It created a massive power imbalance: Trump could act within hours, but his partners had to spend weeks consulting with one another, voting on retaliatory measures, and initiating WTO procedures. The offense was always one step ahead of the defense. This is precisely what the Supreme Court’s decision is beginning to correct.

Without the IEEPA, the pace changes. If Trump’s new tariffs must go through 270–day procedures, partners have time to prepare, negotiate alternative agreements among themselves, and strengthen their own domestic markets. The European Union could accelerate its free trade agreements with Mercosur, India, and ASEAN. Canada could diversify its trading partners more aggressively. These are not easy or quick moves. But the window of opportunity to initiate them has just opened a little wider.

Europe at a Decisive Moment

For the European Union, this is a strategically delicate but potentially fruitful moment. On the one hand, the relative position of Europeans has deteriorated with the new 15% tariffs that affect everyone uniformly, including partners who were not Trump’s primary targets. On the other hand, the loss of the IEEPA reduces Trump’s ability to specifically target Europe with surprise tariff salvos. The balance is not in Europe’s favor, but it is less catastrophic than before.

The real question for Brussels is whether it will take advantage of this relative lull to strengthen its own instruments of trade resilience, or whether it will continue to wait, hoping that the next U.S. election cycle will bring about a change in policy. Lagarde is right to speak of “disruptions” to come. The coming months will be marked by legal disputes in the United States, chaotic negotiations, and constant adjustments. This is not a context that favors investors, but it may be one that, for the first time, slightly favors trading partners vis-à-vis Washington.

I hope European negotiators understand what has just happened—not just technically, but strategically. They have a window of opportunity—not a large one, not a definitive one, but a real window to rebalance the power dynamics that have been overwhelmingly unfavorable for the past two years. The question is whether Brussels has the political agility to seize this moment. History teaches us that windows of opportunity like this don’t stay open for long.

When Institutions Resist

Beyond the economy, geopolitics, and tariffs, the Supreme Court’s decision on the IEEPA raises a fundamental question about the health of American democracy. Since Trump’s election in 2024, many observers have wondered about the ability of American institutions to resist the assaults of an executive branch that was systematically testing the limits of the law. The answer, at least in part, came on Friday: yes, the institutions can hold their ground. Imperfectly, belatedly, and with all the flaws of an overburdened judicial system—but they can hold their ground.

This is significant news that goes far beyond the issue of tariffs. It speaks to the separation of powers, to the courts’ ability to challenge the executive branch even when their own members were appointed by it. It serves as a reminder that institutions are not merely texts. They are also cultures, practices, and precedents—and these aspects are better able to withstand political assaults than legal texts alone.

The Limits of Institutional Triumph

But let us guard against naive optimism. The Supreme Court has invalidated the use of the IEEPA for broad-based tariffs. It has not put an end to Trump’s tariff policy. It has not resolved the underlying problem—a president who views institutional rules as obstacles to be circumvented rather than frameworks to be respected. And recent history shows that for every tool taken away, the Trump administration quickly finds another. Section 122 came into effect just hours after the ruling on the IEEPA. In five months, when Section 122 expires, something else will be invoked. The legal game of cat and mouse will continue, costly for everyone, and unresolved for anyone.

And in the meantime, the real victims of this procedural war remain the same: companies that cannot plan ahead, workers whose jobs depend on fragile international supply chains, and consumers who pay the tariffs at the checkout counter. The legal debate over Sections 122, 232, and 301 is fascinating for professors of international trade law. For a family watching the price of their everyday purchases rise, it’s simply more cause for concern.

I want to be honest with you: I’ve reread the analyses on Section 232, Section 301, and Section 122 several times. I’ve looked for the moment when someone clearly says that this will stop, that someone will put an end to this constant instability. That moment isn’t in the analyses. No one is promising that. Because this isn’t a matter of legal provisions. It’s a matter of political will. And the political will to stabilize global trade doesn’t seem to be on Washington’s agenda for the coming months.

The uncertainty premium is permanent

The financial markets reacted to the Supreme Court’s decision and Trump’s announcements with their usual mixed reactions: initial relief at the news of the court’s ruling, rapid concern over the new 15% tariffs, and general confusion about what all this means for the next six months. But behind these short-term fluctuations, market participants are pricing in something more enduring: a permanent uncertainty premium on assets exposed to international trade. This premium means that investors demand an additional return to compensate for the unpredictable tariff risk—which translates into a higher cost of capital for exposed companies, which curbs investment, which slows growth.

This is the underlying economic mechanism that news reports about “new 15% tariffs” never explain. It is not just the tariff itself that costs money. It is the constant possibility that it will be raised tomorrow, lowered the day after tomorrow, and replaced by something entirely different in three months. Uncertainty comes at a price. It is factored into every investment decision, every long-term contract, and every industrial expansion plan. And that price is paid not only by businesses, but ultimately by workers and consumers.

The compass that no longer points to a stable north

There is a deeper structural shift unfolding behind the dispute over legal provisions. Since 1945, the global economy has been built on a form of American predictability. Not perfection. Not altruism. But a certain stability in the rules of trade, embodied by WTO agreements, bilateral treaties, and the multilateral institutions that Washington had played a major role in creating. This predictability was the global public good that the United States provided in exchange for its trade leadership.

This public good is now eroding. Not just because of Trump—the shift is longer-term and more profound. But Trump is accelerating it dramatically. And the Supreme Court’s decision, as positive as it may be for the rule of law in the United States, does not restore that predictability. It simply states that tariffs will be decided differently—more slowly, perhaps, but not in a fundamentally more stable or predictable way over the long term. The compass of global trade is off course. And it is not a court ruling, however courageous it may be, that will set it back on course.

I remember writing, two years ago, that the real risk posed by Trump to international trade was not the tariffs themselves. It was the erosion of confidence in the U.S. system as a guarantor of a minimum level of stability. Two years later, I stand by every word. What we are experiencing is not a temporary blip. It may be a lasting transformation of the global trade order. And even if Trump leaves office one day, the habits he has developed—bypassing institutions, improvising rules, treating the law as an obstacle—will have left their mark.

A historic setback that does not end the war

So where do we stand? Trump has lost his fastest and most flexible tool. The Supreme Court has rejected the use of the IEEPA as a global tariff weapon. This is a victory for the rule of law in the United States, a slap in the face for the executive branch, and an important signal to trading partners around the world. But the trade war itself is not over. Trump immediately fell back on Section 122, which is temporary and open to challenge. He is considering Sections 232 and 301, which are cumbersome and slow. His administration is exploring every available legal avenue. The determination to maintain high tariffs remains intact. Only the tool has changed.

What has fundamentally changed is the balance of power. Trump’s tariff momentum has slowed. His ability to issue instant threats has diminished. His partners are buying time—not much, but enough to catch their breath, reposition themselves, and develop alternatives. And businesses, investors, and workers on both sides of the Atlantic are entering a new phase: not one of a blitzkrieg, but one of trade guerrilla warfare—longer, more exhausting, and for many, just as costly.

The question that will remain unanswered for a long time

The real question raised by this saga is not a legal one. It is not an economic one. It is political, in the deepest sense of the word: What does the United States want to be in the world? Does it want to continue to be the architect of an imperfect but stable international trade order? Do they want to become just another player, one that plays by its own rules and changes those rules when it suits them? The Supreme Court’s decision settled a specific legal issue. It did not settle that question. And it is that question that will shape the global economy for decades to come.

For now, what is certain is that uncertainty will persist. That disputes will multiply. That trading partners will have to play it by ear. That small and medium-sized businesses and workers will continue to pay the price for decisions made in courtrooms and White House press rooms. Trump’s toolbox is full. The tools are heavier. But they’re there. And he won’t hesitate to use them.

I’ll conclude this article with a conviction that has grown stronger as I’ve written: we are experiencing a historic transformation of the global trade order, and we’re living through it in real time, without truly understanding it. In twenty years, economics students will read entire chapters about 2025–2026 as a pivotal period. We, however, are navigating it in the fog. What I do know is that the answers will not come from Sections 122, 232, or 301. They will come from courageous political decisions on both sides of the Atlantic—decisions that few leaders seem ready to make today. In the meantime, we continue to navigate. And to write.

Signed, Jacques PJ Provost