Uncertainty Is Worse Than Tariffs

*The opinions expressed in this article are those of the author alone and do not reflect the official position of any institutions or organizations with which he is affiliated.

On February 20, the US Supreme Court held that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs, invalidating the Trump Administration’s "emergency" duties.

The judgment - and the subsequent adoption of new tariffs under a different legal basis - has created ripple effects in Europe, where the Turnberry deal has been put on pause by the European Parliament.

Dura lex, sed lex

Ordinary individuals or companies sometimes trigger decisions that reshape entire legal orders.

In Europe, a single Italian consumer (and shareholder) disputing a modest electricity bill from ENEL became the vehicle through which the Court of Justice of the EU (CJEU) articulated the primacy of EU law over national legislation.

On the other side of the Atlantic, U.S. States and a handful of importers, including a wine company (V.O.S Selections) and a family-owned educational toy company (Learning Resources), successfully challenged "Liberation Day" tariffs and curtailed the President’s discretion in trade policy.

The U.S. Administration had argued that IEEPA granted it authority to impose across-the-board tariffs during a declared national emergency to counter "unusual and extraordinary" foreign threats to U.S. national security or the economy.

Tariffs imposed by the Trump Administration were justified under IEEPA by the unusual and extraordinary threat to national security posed by the large trade deficits between the US and its partners (including the EU) for the "reciprocal tariffs" and by the public health considerations related to imports of fentanyl for the "trafficking tariffs".

With a 6-3 majority, the Supreme Court rejected the idea that the reference to "regulating importation" includes adopting tariff measures, which is not specifically referenced in the relevant provision. The Court held that under the so-called "major questions" doctrine, Congress cannot delegate its powers - which includes revenue-raising measures such as tariffs - to make major policy decisions without doing so unequivocally.

New tariffs

In response to the Court’s ruling, President Trump quickly announced a new 10% tariff-raised to 15% over the weekend-on all imports, under the so-called Section 122. The tariff was eventually brought back down to 10%. However, the U.S. administration indicated its intent to see the rate rise to 15%.

This tariff applies to all goods not covered by an exemption from February 24 for a maximum period of 150 days, in addition to the rate applicable under the Most-Favoured-Nation (MFN) clause. Tariffs adopted under a different legal basis, such as the 50% duty on steel and aluminium, are not affected by the Court’s decision.

The Administration has ample room to raise tariffs under other legal bases, including Section 232 (national security), Section 122 (for balance-of-payments issues), Section 301 (unfair trade practices). They might however prove trickier to put in place than IEEPA tariffs. In his State of the Union address, President Trump said that tariffs will "remain in place under fully approved and tested alternative legal statutes".

According to the Tax Foundation’s tariff tracker, before the IEEPA tariffs were struck down, the average effective U.S. tariff rate - measured as tariff revenue over total goods imports-jumped from 2.4% in 2024 to 7.7% in 2025, the highest level since 1947.

Over the same period, the weighted average applied tariff rate on U.S. imports surged from the World Bank’s 1.5% figure for 2022 to an estimated 13.8%, and is expected to remain at 12.1% while Section 122 tariffs are in force before falling to 6.7% once they expire.

And Now What?

The Parliament decided to postpone a vote planned on February 24 on the EU-U.S. trade deal. International trade committee chair Bernd Lange said the deal "should be put on hold until clarity, stability and legal certainty" are reestablished.

The ruling has reduced one channel of tariff risk for EU exporters but immediately created a new layer of uncertainty around the future legal basis of U.S. duties and the stability of the 2025 EU-U.S. deal struck in Turnberry.

Implementation of the EU’s side of the Turnberry deal currently rests with the European Parliament, which has recently shown its desire to have its voice heard in trade matters (it referred the EU-Mercosur deal to the CJEU for a legal opinion).

The new 15% tariff (which has been brought back to 10%) would have applied on top of the MFN rate. It would have exceeded the all-inclusive 15% cap agreed in Turnberry. Even with a 10% tariff (plus the MFN rate), tariffs on certain products will exceed 15%.

The EU is not the only trading bloc pressing the pause button on its trade deals with the U.S. Taiwan’s government announced it would not move forward with the parliamentary ratification of its bilateral trade deal - agreed only two weeks ago - before it had received sufficient reassurances from the U.S.

Bruegel’s Ignacio Garcia Bercero called for the EU response to be "firm without escalation", which could include retaliatory tariffs in case the U.S. introduces Section 232 tariffs or using the Anti Coercion Instrument (ACI) if threats against the EU’s digital rules materialize.

Businesses need legal certainty to operate and invest. Securing clear assurances regarding the trade relationship with the U.S. is a priority, if need be by threatening to retaliate with the relevant legal tools developed by the EU. The EU and the U.S. share the world’s largest bilateral trade and investment relationship, with €867 billion in goods and €817 billion in services traded across the Atlantic in 2024. 

The Court’s decision and the added uncertainty over future tariff rates is yet another reminder that the EU must press ahead with its agenda on competitiveness and regulatory simplification.

The EU must also continue to strike new trade deals and deepen economic integration with its partners. In a world where legal certainty and the rule of law are themselves a source of competitive advantage, Europe cannot afford complacency.

Copyright image : WIN MCNAMEE / GETTY IMAGES NORTH AMERICA / Getty Images via AFP
The Supreme Court of the United States.