After Supreme Court Strikes Down Tariffs, White House Signals Escalation — Economists Push Back

The political and economic fallout intensified this week after the U.S. Supreme Court ruled that former President Donald Trump did not have unilateral authority to impose sweeping global tariffs without congressional approval.

Rather than signaling retreat, members of the administration indicated they may pursue alternative mechanisms — including sector-based tariffs or even embargo powers — to maintain leverage in trade negotiations.

Economists and legal scholars say the moment represents a constitutional reset. Markets, meanwhile, responded positively to the court’s decision.

The Supreme Court Ruling: Congress Holds the Power

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The Court’s ruling did not declare tariffs unconstitutional. Instead, it reaffirmed that the authority to impose broad-based tariffs — effectively a form of taxation — lies with Congress under Article I of the Constitution.

Legal analysts describe the decision as a reminder that the U.S. is not structured as a monarchy. Executive power over trade is substantial but not unlimited.

If a president wishes to implement sweeping tariffs, Congress must authorize them.

White House Response: “Nothing Changes”

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At a press conference following the decision, Trump indicated that tariffs would remain central to his trade strategy and suggested that rates could even increase through alternative legal channels.

Treasury Secretary Scott Bessent later stated in an interview that the administration could explore:

• Section 232 tariffs (national security justification)

• Section 301 tariffs (trade retaliation authority)

• Potential embargo powers

Bessent characterized the Court’s decision as a setback for “instantaneous leverage,” though he acknowledged the matter could be remanded to lower courts for further litigation.

Markets React Positively

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Financial markets responded with gains following the ruling.

Economist Justin Wolfers of the University of Michigan noted that equity markets appeared to interpret the decision as positive for U.S. business value.

“If tariffs were delivering economic benefit, markets would have fallen when they were struck down,” Wolfers said. “Instead, markets rose — signaling that investors view reduced unilateral tariff power as constructive for economic stability.”

The Trade Deficit Question

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One of the administration’s primary stated goals for tariffs was reducing the U.S. trade deficit.

However, 2025 trade deficit figures show little change compared to 2024 levels. According to analysts, tariffs did not significantly alter the overall trade balance.

Many economics textbooks argue that tariffs are not an effective tool for addressing structural trade deficits, which are influenced more heavily by macroeconomic factors like national savings and investment levels.

The Refund Question: Billions at Stake

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Another unresolved issue is the estimated $130–$175 billion in tariff revenue collected.

If courts ultimately rule those tariffs invalid, importers may seek refunds. Administration officials have signaled potential prolonged litigation over payouts.

Economists emphasize that tariff revenue, while described as coming from foreign countries, is typically paid by U.S. importing firms and often passed on to consumers through higher prices.

Global Trade Realignment

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Meanwhile, trade dynamics abroad continue evolving.

The Trans-Pacific Partnership (TPP), initially advanced during the Obama administration, aimed to centralize U.S. influence in Pacific trade networks. The United States withdrew from the agreement in 2017.

Recent moves by Canada and European leaders to deepen trans-Pacific and trans-Atlantic cooperation have sparked debate over whether global trade blocs are reorganizing without U.S. leadership.

Wolfers described it as a “connect-the-dots moment,” suggesting other nations are forming partnerships independent of Washington.

The Broader Debate: Policy vs. Politics

Supporters of Trump’s tariff strategy argue that aggressive trade policy is necessary to rebalance manufacturing and confront unfair trade practices.

Critics counter that tariffs function as regressive taxes and introduce instability without delivering measurable trade improvements.

The Supreme Court ruling does not end the debate. Instead, it shifts the battleground to Congress — where any sweeping trade measures must now pass through legislative approval.

As Wolfers concluded, “This was not about liking or disliking a president. It was about reaffirming that economic policy must follow constitutional process.”

For now, markts appear to welcome that distinction.