Shipping containers at the port of Oakland in California stand at the center of a new economic dilemma following the Supreme Court's decision on February 23, 2026, against former President Donald Trump's tariffs.
On Friday, the Supreme Court nullified President Trump's trade tariffs, but the aftermath may intensify global trade issues. Economists have warned CNBC that the U.S. might face economic setbacks as a result.
In a 6-3 decision, the court determined that Trump lacked the legal authority to impose his extensive tariffs last April under the International Emergency Economic Powers Act (IEEPA).
Reacting to the ruling, Trump immediately imposed up to 15% tariffs on various U.S. trading partners, aggravating global trade tensions further. European Union leaders criticized these unexpected tariffs, suggesting they could disrupt previously negotiated deals with both the EU and the United Kingdom. Consequently, the EU postponed a crucial vote on its U.S. trade agreement on Monday.
The backlash against these new U.S. tariffs highlights widespread dissatisfaction with Trump's unpredictable trade strategy, potentially prompting foreign nations to reduce trade with the U.S. and causing businesses to delay expansion, investment, and hiring.
This situation could negatively impact the U.S. economy. "It shifts how trade is done with the largest economy in the world, and that has economic consequences," said Mike Reid, head of U.S. economics at Royal Bank of Canada, to CNBC, referencing both the Supreme Court's decision and the new tariff implementations.
Downside
The trade conflict is expected to create a cautious environment among businesses and foreign governments, according to Mark Zandi, chief economist at Moody's Analytics, resulting in "nothing but downside" for the U.S. economy.
"Businesses don't know what's going to happen next," Zandi told CNBC. "They're going to invest less, they're going to hire less, they're going to be less aggressive in their expansions," which can restrict U.S. growth.
Foreign governments might react similarly amid growing uncertainty, possibly leading them to "continue to pull away from the U.S.," stated the economist.
"They've got to be pulling their hair out over all of this," Zandi noted. "Perceptions of the U.S. are increasingly that we're a poorly managed economy, and objectively speaking, they're right. It's a bit of a mess that feels like it's getting messier." These perceptions could result in efforts to steer trade away from the U.S. towards other partners, including China.
China's exports increased by 6.6% in U.S. dollar terms last December compared to the previous year, exceeding analyst expectations and pushing the country's annual trade surplus to a record high, according to Chinese customs data. Imports marked their fastest growth in three months, the same data showed.
Trump Trade Taxes
The Trump administration plans to proceed with its trade strategies and intends to utilize multiple sections of the Tariff Act of 1974, stated U.S. Trade Representative Jamieson Greer.
President Trump refers to section 122 of the Tariff Act to justify the new tariffs effected this weekend, though that section confines their validity to 150 days, expiring mid-July, unless Congress approves them afterward.
However, the administration aims to use sections 232 and 301 of the Tariff Act to complement its new section 122 tariffs, potentially allowing the U.S. to continue imposing tariffs on its foreign trading partners over the coming years, at least.
Despite these developments, some experts suggest investors and economists should not panic yet.
The introduction of the new trade taxes "implies little change in the effective tariff rate or our inflation forecasts in the near term," Citigroup economist Veronica Clark wrote in a client note.
"Eventual Section 301/232 tariffs could impact various goods' prices in the future, but details remain uncertain," Clark added.