U.S. and foreign officials, corporate executives, analysts and investors had begun to hope the tumultuous U.S. trade policy reversals of last year were finished. Now they face rekindled uncertainty from a U.S. Supreme Court ruling last week that struck down key parts of President Donald Trump’s tariff plans and his ensuing suggestion of substantial levies coming in an attempted workaround.
Reminiscent of the early months of 2025, when the administration’s tariff proposals seemed to switch on a moment’s notice, the landscape of what goods will be taxed, at which rates, from which exporting countries, is again up in the air. Businesses, many of whom felt they’d found a workable approach to higher tariffs, will now have to decide whether to shift their pricing plans, rush to restock inventories while the tariffs are in limbo, and perhaps whether to delay hiring or investment plans while the situation gets sorted.
“If it shakes the whole equilibrium which people in trade have got used to…it is going to bring about disruptions,” European Central Bank president Christine Lagarde said Sunday on CBS’s “Face the Nation”. “You want to know the rules of the road before you get in the car. It’s the same with trade. It’s the same with investment.” People “want to do business. They don’t want to go into lawsuits,” she said, adding that she hoped any subsequent U.S. tariff plans would be “sufficiently thought through so that we don’t have, again, more challenges, and the proposals will be in compliance with the Constitution.”
The Supreme Court in a 6-3 ruling on Friday voided most of the tariffs Trump imposed last year, finding that the emergency law he relied on did not allow the imposition of tariffs. Using a different statute Trump announced first a 10%, then a 15%, global levy that could last five months while the administration searches for more durable workarounds.
Gregory Daco, chief economist at EY-Parthenon, said even if businesses were finding ways to cope with the previous tariffs, the uncertainty around trade policy had never gone away, and will continue to influence business decision-making.
“We’ve seen extreme volatility by country and by product. That’s very uncertain still,” Daco said. “It’s impossible to plan. You hear that tariffs are off and you are considering how to get refunds. Then a few hours later it’s 10%. Then it’s 15% the next day….Not having that stable framework is hurtful for activity, hiring, investment.”
THE VIEW HAD BEEN CLEARING
The sense that the confusion of 2025 had begun to lift was widespread. U.S. Federal Reserve policymakers for example had become comfortable that the inflation impact of tariffs was about to ease.
That may remain the case, but the situation is also now more fluid as the administration looks at different tariff strategies that could take months to spool out, with likely legal challenges at each turn.
Import tax rates could drop in the short term, but then might rise again over an uncertain timeline as Trump tries to replicate the tariffs the court said the president could not impose by fiat, by using different laws that may require separate investigations or even Congressional action.
The value of such procedural safeguards in producing stable policy was cited by Justice Neil Gorsuch in an opinion supporting the court’s majority. He argued that to survive the legislative process, proposals “must earn such broad support…they tend to endure, allowing ordinary people to plan their lives in ways they cannot when the rules shift from day to day.”
The value of certainty was mentioned often by Fed officials last year. They said the rapid shifts around trade, immigration and other policies had made it hard to read the economy, and seemed to be pushing businesses to the sidelines on hiring and investment decisions.
THE U.S. OUTLOOK HAS BEEN BULLISH
Any economic fallout from the Supreme Court ruling comes at a moment of largely bullish sentiment. In a new poll by the National Association for Business Economics, nearly 60% of economists who responded said they did not expect a recession for at least a year, up from 44% as of August. A solid majority of 74% also said they felt the spread of AI technology would at least “moderately increase productivity growth over the next three to five years,” a potentially significant change in the capacity of the U.S. economy.
The new round of uncertainty may not push that off course, but it could still “ding” U.S. growth in coming months, Bernard Yaros, lead U.S. economist for Oxford Economics, wrote on Friday following the Supreme Court ruling.
He estimated the effective tariff rate, after excluding the levies tossed out by the Supreme Court, would fall from 12.7% to 8.3%. But that leaves open the impact of Trump imposing the new 15% levy across the board — which may or may not apply to countries that have reached separate bilateral deals with Trump, and would only last for five months. The administration, meanwhile, will be looking for more permanent fixes that may require separate investigations and potentially Congressional action.
“Any economic boost from lowering tariffs in the near term will likely be partly offset by prolonged uncertainty,” he said. “Even if the administration replicates the overall level of tariffs using other means, the by-sector and by-country implications could end up looking quite different, which will create another bout of trade policy uncertainty for businesses, investors, and households.”
(Reporting by Howard Schneider)
