Trump Pivots to 1974 Trade Act for 10% Tariff After SCOTUS Defeat

The Trump administration’s immediate pivot to the Trade Act of 1974 represents a sophisticated, albeit high-stakes, legal maneuver to preserve a protectionist trade agenda in the face of judicial rebuke. By a 6-3 margin, the Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) of 1977 does not grant the President the unilateral authority to impose broad-based import tariffs—a power the Constitution explicitly reserves for Congress. This decision is a significant victory for constitutional originalists and trade advocacy groups who have long argued that the executive branch has overextended its emergency powers to bypass legislative oversight.

The majority opinion, authored by Chief Justice John Roberts and joined by conservative Justices Neil Gorsuch and Amy Coney Barrett alongside the court's liberal wing, underscores a growing judicial skepticism toward the 'unitary executive' theory in the realm of international commerce. The ruling effectively invalidated previous tariffs that had been justified under national security or emergency pretenses. However, the administration’s response was nearly instantaneous. By invoking Section 122 of the Trade Act of 1974, the White House is utilizing a specific provision designed to address balance-of-payments deficits. This authority allows for a temporary import surcharge of up to 15% for a duration of 150 days. While this provides a legal bridge for the administration, it also introduces a ticking clock, as any extension beyond the 150-day window would likely require congressional approval or a new justification that could face further litigation.

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Under the previous IEEPA-based regime and subsequent bilateral negotiations, some Indian imports were facing tariffs as high as 18%.

For international trade partners, particularly India, the regulatory landscape has shifted overnight. Under the previous IEEPA-based regime and subsequent bilateral negotiations, some Indian imports were facing tariffs as high as 18%. The new executive order effectively caps these at 10%, creating a paradoxical situation where a 'fresh' global tariff actually results in a rate reduction for certain Indian goods. Despite this, President Trump has maintained a hardline rhetoric, insisting that the 'deal' with Prime Minister Narendra Modi remains intact and that India will continue to pay while the U.S. does not. This suggests that the administration views the 10% tariff not as a final state, but as a baseline from which to negotiate further concessions.

From a RegTech and compliance perspective, this development necessitates an immediate audit of customs and duty automation systems. The effective date of February 24 leaves little room for logistics providers to adjust their pricing models. Furthermore, the shift in legal authority from IEEPA to the Trade Act of 1974 means that legal departments must now prepare for a different set of challenges. Section 122 requires the President to demonstrate a 'serious' balance-of-payments deficit, a metric that trade lawyers will undoubtedly scrutinize and potentially challenge in lower courts.

Looking forward, the industry should watch for two key developments: the response from the U.S. Treasury regarding the specific 'balance-of-payments' justification and the potential for Congress to introduce clarifying legislation. While the Supreme Court has reasserted congressional power, it remains to be seen if a divided Congress has the political will to reclaim its role in trade policy or if it will allow the 150-day 'temporary' surcharges to become a recurring feature of executive trade strategy. For now, the global trade environment remains in a state of high volatility, dictated by a cycle of executive action, judicial correction, and rapid administrative adaptation.