Trump has been blocked by the US Supreme Court from using tariffs as a tool of geopolitical pressure, but his new policy of a 15% tariff across the board will still have big ramifications.
Stephanie Rickard is a Professor at the London School of Economics. Her book, “Spending to Win” examines government subsidies. Her research explores industrial subsidies, agricultural subsidies and subsidies related to the environment.
Cross-posted from the LSE Politics blog
As was widely anticipated, on Friday, the US Supreme Court ruled against President Trump’s tariffs, specifically those imposed using the 1977 International Emergency Economic Powers Act, or IEEPA. The Court ruled that the president does not have the authority under this rule to impose tariffs. So, what happens now?
Within hours of the ruling, Trump announced that he would use a different legal tool (Section 122 of the Trade Act of 1974) to impose a 10 percent (now 15 percent) tariff on all countries. To use this authority, the president must declare that a fundamental problem with international payments requires the 15 percent tariffs. His top trade lawyer has been at pains to point out that this tariff does single out any specific country but applies equally to all countries across the board.
Tariffs and industrial policy
This isn’t the first time Trump has imposed sweeping, across-the-board tariffs. His “reciprocal tariffs”, announced in April 2025, also applied broadly to virtually all goods from a given country, with different rates for different countries. What’s striking about both rounds of tariffs is how indiscriminate they are. Tariffs, and industrial policy more broadly, tend to be selective. Governments usually target specific industries or economic activities they want to protect or promote, using tariffs and other industrial policies, such as subsidies. Trump’s blanket approach marks a sharp departure from how governments have used trade and industrial policy for decades, as I wrote in the World Trade Review last year.
Tariffs are one form of industrial policy, which refers to the strategies governments use to shape their economies, support certain industries, and create jobs. The question now is what happens to industrial policy around the world in the wake of America’s pivot toward broad protectionism, and its simultaneous dismantling of Biden-era programs like the Inflation Reduction Act, which had subsidized green technology.
Some countries may seek to ramp up their own industrial strategies to protect domestic producers from the effects of US tariffs. They may respond not by raising tariffs and risking a trade war, but by pouring money into subsidies and investment incentives instead. For wealthier governments with room in their budgets, this is a potential option. And if enough countries follow suit, Trump’s tariffs could ironically accelerate a global wave of subsidy spending.
Why tariffs may be here to stay
There’s another wrinkle that makes all this more complicated: the new 15 percent tariffs can only legally stay in place for 150 days. But businesses shouldn’t mistake this for a sign that relief is coming. The Trump administration is widely expected to use this time to launch investigations under a separate legal authority (Section 301 of the same 1974 Trade Act) that allows tariffs to be imposed on countries who violate trade agreements or engage in unfair practices. Active 301 investigations are already underway for Brazil and China, and the administration has argued that manufacturing in nearly all forms is tied to national security, laying the groundwork for long-term tariffs on a wide range of goods.
As for the money already collected under the now-overturned tariffs, which have been estimated to cost the average American household around $1,600 per year, don’t expect to see it refunded to importers any time soon. The Supreme Court did not order refunds in their ruling last week, and in his dissent, Justice Kavanaugh acknowledged that any refund process would likely be a “mess.” The US Trade Representative Jamieson Greer has made it clear that the administration will wait for guidance on refunds to be issued by the Court of International Trade. So, it looks like it is back to the courts, again.
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