SCOTUS Strikes Down Reciprocal Tariffs; Trump Pivots to Global 10% Levy

The US Supreme Court’s landmark decision to strike down the use of the 1977 International Emergency Economic Powers Act (IEEPA) for 'reciprocal' tariffs marks a significant constitutional check on executive trade authority. By ruling that the IEEPA cannot be used as a broad tool for trade rebalancing without specific emergency justifications, the court has effectively dismantled the legal foundation of the Trump administration's primary trade negotiation lever. However, the regulatory reprieve for international trade partners was short-lived. Within hours of the ruling, the administration pivoted to Section 122 of the Trade Act of 1974, imposing a 10 percent global tariff. This rapid shift highlights a persistent strategy of 'statute-hopping' to maintain protectionist measures, creating a high-volatility environment for global supply chains.

For South Korea, the fallout is particularly acute. Over the past year, the South Korean government and its largest conglomerates—including leaders in the semiconductor, automotive, and battery sectors—had tailored their US operations to align with the now-defunct reciprocal tariff framework. The sudden invalidation of these rules, followed by the imposition of a flat global tariff, creates a 'compliance vacuum' where previous trade agreements and investment assumptions no longer hold. Yoon Sang-ha of the Korea Institute for International Economic Policy (KIEP) notes that this legal instability is the primary driver of current market anxiety. When the legal basis for trade shifts overnight, the immediate corporate response is typically a freeze on capital expenditure and a delay in export fulfillment until the new regulatory floor is established.

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Yoon Sang-ha of the Korea Institute for International Economic Policy (KIEP) notes that this legal instability is the primary driver of current market anxiety.

From a RegTech and legal compliance perspective, this development underscores the necessity for real-time monitoring of statutory authority. Trade lawyers are now shifting their focus from IEEPA-related litigation to the specific requirements of Section 122, which allows for temporary import surcharges to deal with large balance-of-payments deficits. Unlike the IEEPA, Section 122 has strict time limits and specific criteria for application, which will likely become the next battleground in US trade courts. For South Korean firms, the challenge lies in determining whether their existing Free Trade Agreement (FTA) provisions can shield them from this new global levy, or if the 'emergency' nature of Section 122 overrides bilateral treaty obligations.

Industry experts like Chung Ji-young of Jeonbuk National University argue that 'unpredictability' has become a structural risk factor that is harder to hedge against than the tariffs themselves. While major South Korean firms have shown resilience and flexibility in the past, the cost of constant strategic pivoting is substantial. The transition from a targeted reciprocal system to a broad global tariff suggests a move toward more blunt instruments of trade policy, which may simplify the administration's enforcement but complicates the risk modeling for foreign investors.

Looking forward, the legal community expects a wave of new challenges against the Section 122 order. If the judiciary continues to narrow the scope of executive power in trade, the administration may be forced to seek more explicit legislative support from Congress, a move that would bring more transparency but also more political friction to the trade process. For now, South Korean trade officials are expected to engage in high-level diplomatic outreach to secure exemptions, even as their domestic industries prepare for a period of sustained export disruption and increased operational costs in the US market.