ISLAMABAD:

The anxiously awaited ruling of the US Supreme Court on Friday striking down the “reciprocal tariffs” represents a significant constitutional and political setback for President Trump. The tariffs, imposed under the Emergency Powers Act, had been central to his trade and foreign policy strategy. They were justified on the grounds that persistent trade deficits constituted a national emergency.

The court rejected this expansive interpretation, ruling that emergency powers cannot override the constitution’s assignment of tariff authority to Congress, leaving the president no choice but to withdraw the duties. Yet the story does not end there. Almost immediately after complying with the ruling, Trump signalled that his broader tariff agenda remains intact. While expressing strong disagreement with the decision, he issued a proclamation imposing a new 15% global tariff under Section 122 of the Trade Act of 1974. This rarely used provision allows the president to impose temporary import surcharges for up to 150 days, after which congressional approval is required for continuation.

In practical terms, the court’s decision establishes an important limit. The president cannot rely on emergency powers to impose open-ended, broad-based tariffs. However, it does not remove other statutory authorities. US trade law contains multiple instruments, each with its own procedural and legal thresholds. Nearly one-third of existing tariffs imposed under these statutes remain in force and indications from various government spokespersons are that these are likely to be expanded. The era of unrestricted emergency tariffs may have ended, but tariff activism has not.

Nevertheless, uncertainty persists. What becomes of bilateral trade arrangements negotiated while the emergency tariffs were in force? Several countries, including India and Bangladesh, entered into side agreements committing to purchase substantially larger volumes of US goods in exchange for partial tariff relief. If the legal foundation of those tariffs has been invalidated, the status of such commitments becomes unclear. The White House has stated that the United States will continue to honour its legally binding Agreements on Reciprocal Trade and expects the same from its partners.

For Pakistan, some uncertainty will remain. While the new 15% tariff places Pakistan at the same level as all other countries, questions remain about the broader trade relationship. For example, would Pakistan be required to negotiate a bilateral trade arrangement like those reached with countries such as India and Bangladesh?

There is perhaps a possible understanding related to the procurement of certain quantities of US energy products, defence equipment, and selected agricultural commodities to narrow the trade deficit and for receiving lower reciprocal tariff. However, the key question is what Pakistan receives in return, since the 15% tariff is applied globally rather than being tailoured to specific countries.

Another unresolved issue concerns the approximately $170 billion in tariffs already collected under the now-invalidated emergency measures. These duties were paid not by foreign exporters but mostly by US importers. Any refund process would likely prove complex and administratively burdensome.

Although the government may attempt to delay refund claims, the tariffs have been deemed unlawful from the outset, strengthening the legal position of claimants. The fiscal and administrative consequences could be substantial.

The court has clarified the constitutional limits of emergency authority, but the global trading system will continue to operate under the shadow of strategic tariff policy. Except for China, most countries initially adjusted to US tariff pressure rather than confront it directly.

Many are now recalibrating. The European Union and middle powers such as Canada and Australia, along with emerging blocs including BRICS, are diversifying supply chains and strengthening alternative trade corridors to reduce exposure to abrupt US policy shifts. It is not likely that the court decision would change their current readjustments away from the United States. While the judiciary may curb executive overreach, the structural changes in global trade triggered by aggressive tariff policies are unlikely to be easily reversed. Pakistan must navigate this evolving landscape with strategic caution to avoid becoming a victim of collateral damage in a broader economic confrontation.

The writer is a member of the National Tariff Policy Board. He has previously served as Pakistan’s ambassador to WTO