Tariffs, trade wars and Trump’s crucial China talks

When the United States Supreme Court ruled that the International Emergency Economic Powers Act or IEEPA does not authorize tariffs, it more than invalidated President Donald Trump’s favored policy. 

The ruling triggered the need to rapidly rewrite the White House’s economic statecraft playbook. The decision narrows unilateral presidential trade powers, constrains improvisational coercion, and shifts the terrain of US-China competition. 

Far from ending tariff confrontation with Beijing, the ruling recalibrates how – and with what credibility – Washington can wage its trade wars. The immediate legal implication is straightforward. 

Tariffs imposed under IEEPA – including Trump’s 10% “fentanyl emergency” move on Chinese imports and the sweeping “reciprocal” duties that targeted dozens of trading partners – no longer rest on valid statutory ground. 

If a legal basis was IEEPA alone, it is now unsustainable. For importers, that opens the possibility of large refund claims through the US Court of International Trade. For the president, it removes one of the fastest tools in the executive arsenal.

The ability to invoke emergency powers and immediately raise trade barriers.

National security

Yet the structural architecture of US tariffs on China remains largely intact. Duties imposed under Section 301 of the Trade Act of 1974 dated back to 2018. They are still the backbone of pressure on Chinese goods and remain untouched. 

National security tariffs under Section 232 also stand, as do anti-dumping and countervailing duties derived from Commerce Department investigations. Those include the recently finalized 205% tariffs on Chinese active anode materials for batteries.

For Beijing, the real significance of the decision lies in how it reshapes incentives. Presidents of both parties have treated economic emergency authorities as flexible instruments of foreign policy leverage for decades.

But the Supreme Court has now indicated that flexibility has limits. This could slow escalation. The era of instantaneous tariff retaliation is not over, but it is constrained. 

The decision also means that Chinese officials can now argue that American tariff threats are made empty by their constitutional guardrails. That strengthens their narrative that US economic coercion is not only controversial but also contested and illegal domestically. 

Beijing has criticized the Trump administration for undermining the rule-based international trade system by imposing tariffs and unilateral sanctions. 

Following the Court’s ruling, China’s Ministry of Commerce noted that the Trump administration’s measures, including reciprocal and fentanyl-related tariffs, violate international trade rules and American domestic law.

Bargaining space

The timing of the Court’s decision carries particular significance for the scheduled summit between Trump and Chinese President Xi Jinping. By invalidating IEEPA as a tariff authority, the Court has inadvertently rebalanced the bargaining space ahead of the visit. 

Trump now enters the talks with one less unilateral lever at his disposal, a change that will not be lost on Chinese negotiators. They will likely view the ruling as slightly improving Beijing’s negotiating position ahead of future trade talks. 

If Washington cannot easily escalate tariffs on its own authority, China now has greater time, leverage, and room to maneuver. Delay becomes a rational strategy.

For Trump, the leaders’ summit could shift to a more structured bargaining process – one that requires explicit legislative buy-in for any new tariff measures. In practical terms, this reduces the immediacy and unpredictability of his strategy.

The decision also changes how businesses interpret geopolitical risk. In the short term, firms must reassess supply-chain costs, audit which tariffs remain legally valid, and determine whether they are eligible for refunds. 

For multinational corporations, slower policy can mean more predictable policy – even if underlying tensions remain high.

Yet there is another side to that coin. Economic statecraft works best when threats are credible, rapid, and scalable. By restricting the president’s ability to impose tariffs under emergency authority, the Court has reduced one dimension of that flexibility. 

The administration can still deploy other legal pathways – temporary tariffs or new trade investigations – but these tools have limits. Speed, in coercive diplomacy, is itself a form of leverage. That leverage is now more limited.

Congressional approval

The Trump administration has already begun deploying alternative strategies to maintain leverage by resorting to more specific trade laws.

Trump has invoked Section 122 of the balance-of-payments authority to impose a 15% global tariff. This lever has a 150-day window, after which the president’s authority to maintain these duties expires and will require Congressional approval. 

While the statute does not explicitly forbid the president from declaring another balance-of-payments emergency to restart the clock, doing so would likely face severe legal and political challenges. 

The 150-day Section 122 window is not a permanent solution, but it provides the Trump administration with a five-month bridge to finalize more permanent, investigation-backed tariffs under different laws.

These changes do not amount to a sudden strategic windfall for Beijing. The structural factors driving US-China strategic rivalry – technological competition, industrial policy clashes, and security tensions – remain unchanged. 

But it does dull the edge of trade wars a bit by requiring them to be fought within statutory boundaries. The broader implication is that American economic power is still rule-bound even as geopolitical rivalry intensifies, and US institutions are strained by Trump’s politics. 

That paradox could define the next phase of Sino-American relations. Washington retains formidable tools of pressure, but deploying them will require more consensus and time. Beijing, for its part, gains a modest tactical advantage but not a strategic reprieve.

So, the Court’s decision does not end tariff confrontation. It professionalizes it. Economic conflict between the world’s two largest economies will continue.

Political will

But it will proceed less like an improvised duel and more like a regulated contest, shaped as much by legal architecture as by political will.

Zongyuan Zoe Liu is a Maurice R. Greenberg senior fellow for China studies at the Council on Foreign Relations. This work represents the views and opinions solely of the author.

This edited article was published by the Council on Foreign Relations under a Creative Commons license. Read the original here.

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