US Court strikes down tariff framework, SBI Research says policy landscape may shift

Following a US court’s decision to invalidate the existing tariff structure, a latest report by SBI Research said the move could reshape the global policy landscape and alter the trajectory of uncertainty.

“Scrapping of the tariff structure by the Court(s) can reduce uncertainty going forward, while jurisdictions will need to adopt counter-intuitive negotiation strategies to position themselves strategically during the interim period, where ultimate authority lies with a delicately balanced US Congress,” the report said.

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Countries may need to adopt unconventional negotiation strategies during this interim period, as the final authority over tariffs rests with the US Congress, it added.

The report noted that the interaction between inter-sovereign treaties and actions by juristic persons on tariff matters could create complexity, if not disruption, in establishing an effective tariff framework.

Notably, the US Supreme Court issued a landmark ruling invalidating the President and the Administration’s use of tariffs under the International Emergency Economic Powers Act (IEEPA), 1977. The Act had never previously been used by a President to impose tariffs and has limited relevance in peacetime.

In response, the executive branch has invoked Section 122 of the Trade Act of 1974 to impose a new 10 per cent global tariff on all imports into the United States for 150 days. This marks the first-ever use of Section 122 authority. The temporary measure will take effect from 24 February 2026 and continue until July, unless Congress ratifies or extends it.

Under the Trade Act, the President can impose temporary import surcharges of up to 15 per cent or quotas to address US balance-of-payments concerns. These measures can remain in force for a maximum of 150 days unless extended through legislation.

The report said that during this period, the Administration is expected to complete investigations and impose tariffs under Sections 301 and 232 of the Trade Act.

The new 10 per cent tariff includes exemptions, notably for goods from Canada and Mexico that comply with the United States-Mexico-Canada Agreement (USMCA), as well as certain existing national security-related tariffs.

According to SBI Research, the Court’s decision may not entirely prevent the President from imposing similar tariffs using alternative statutory authorities.

A second concern relates to the ruling’s impact on existing trade agreements. Since IEEPA-based tariffs had facilitated trade deals worth trillions of dollars with countries including China, United Kingdom, and Japan, the judgment could create fresh uncertainty around several trade arrangements.

Such uncertainty, the report noted, may complicate global trade negotiations in the near term.