Trump Tariff Magic ended with the American SC Decision-Court dealt a major blow to President Donald Trump’s economic agenda, ruling that he lacks the authority to impose sweeping tariffs by the stroke of a Pen

The court on Feb. 20 tossed the tariffs that are the centrepiece of his economic policy and a major foreign policy tool– but that have also raised costs for consumers and businesses. The 6-3 decision from the conservative court was its first major ruling against Trump’s controversial expansive view of presidential power. “The President asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration, and scope,” Chief Justice John Roberts wrote.

“In light of the breadth, history, and constitutional context of that asserted authority, he must identify clear congressional authorization to exercise it.”

“Through that process, the Nation can tap the combined wisdom of the people’s elected representatives, not just that of one faction or man,” he wrote. “And because laws must earn such broad support to survive the legislative process, they tend to endure, allowing ordinary people to plan their lives in ways they cannot when the rules shift from day to day.”

Trump has argued that the tariffs are crucial to his ability to open foreign markets to more trade, to encourage companies to boost manufacturing in the United States, and to raise money for the federal budget. But he has other options to impose tariffs.

The high court ruled he wasn’t authorized to impose tariffs under the 1977 International Emergency Economic Powers Act. But other statutes would allow Trump to impose tariffs, as he has on steel and aluminum, which weren’t affected by the decision.

“On a whim, the President would upend entire industries and drastically drive up costs or block our small businesses from markets they depended on – it was sheer stupidity that cost us jobs and drove up prices for just about everyone,” Murray said.

In a dissent joined by Justices Clarence Thomas and Samuel Alito, Justice Brett Kavanaugh called tariffs a “traditional and common tool to regulate importation” that the law gives to the president. “The tariffs at issue here may or may not be wise policy,” Kavanaugh wrote. “But as a matter of text, history, and precedent, they are clearly lawful.” And he said the majority’s decision “says nothing” about whether and how the government must return the billions of dollars already collected. That process, Kavanaugh said, will likely be a “mess.”

*From factories to services*

The reality is that through structural economic shifts spanning decades, America substituted mundane factory jobs with employment in high-end services and technology, letting low-productivity jobs slide to lower-income countries where labor costs were commensurate with the value added by each worker  wages being about a fifth of those in the US in China, and less than a twentieth in India.

It was seen as a win for American companies, which could conceptualize and design products at home and have them produced abroad to keep costs down and prices competitive. Now, the cost of reallocating labor to recreate the America of the 1950s — when manufacturing contributed 21-25% to GDP, compared to today’s 10% — would be staggering.

Rather than chasing a nostalgic mirage — which would likely destroy more jobs than it creates — manufacturing’s decline should be read alongside the rapid expansion of the services sector, which now represents about 80% of the GDP [3] and employs roughly 80% of workers in America. In addition, America still retains the top spot in services exports to the world.

But what about America’s swelling trade deficit, which, despite a surplus of $30.1B in services, shows a deficit of -$86.9B in trade in goods  (January 30, 2026)? This negative balance reflecting more imports than exports  may look problematic on the surface, but it reflects structural realities in how America relates to the world economy.

First, Americans — who own about 34% of global wealth  are wealthy compared to the rest of the world and are more likely to be consumers than low-cost producers. Strong American growth over the last few decades has meant higher incomes, which have translated into a higher demand for imports, entrenching the deficit. Second, the dollar’s status as the reserve currency of choice means there is robust demand for it, making dollar-denominated American exports expensive for foreign buyers while making imports cheap. Third, despite being a leader in high-tech innovation, global production networks mean America must import critical raw materials and intermediate goods to finish them into final, high-tech products.

It may be that US President Donald Trump actually appreciates the structural reasons behind the trade deficit and is merely using the “tariff-led prosperity” narrative as domestic cover to seize what he can — minerals, energy, territory, or influence. Even so, the structure of the world economy cannot be undone in a four-year presidential term — except to the detriment of America itself.

What has transpired as a result of his threats is a repositioning of many of America’s most important trade partners. Canada has inched closer to China, entering a ‘strategic partnership’. The European Union and India have entered what has been termed “the mother of all deals.” Regional Comprehensive Economic Partnership (RCEP), a bloc whose formation was catalysed by Trump’s withdrawal from the Trans-Pacific Partnership (TPP) in his first term, has been seen as deepening recently. Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), both have applications piling up, as anxious countries look to hedge against a mercurial America.

The shift is so pronounced that British economists are now proposing a ‘Ministry of Economic Warfare’  to coordinate strategy against major powers — treating Washington as a potential economic adversary. Tariffs help no one. They have nudged supply chains away from America, dented the country’s reputation as a reliable partner, triggered an affordability crisis , and created virtually no jobs; indeed, 2025 has seen the slowest job creation since the pandemic.

But what’s worse is the precedent it sets for a global order that is more fragile than it has been since WWII — whether through the horrors in Gaza, the offensive in Ukraine, or the shadow over Taiwan. When economic integration could have built bridges, Trump chose to burn the few that remained — to what end?

In his most far-reaching trade measures since returning to the White House, Donald Trump enforced 25% tariffs on imports from Canada and Mexico, which came into force on Tuesday, 4 March. He also imposed an additional 10% tariff on Chinese imports, on top of a 10% levy rolled out last month. And of course, he declared his intention to implement similar measures on European imports last week. But as usual with Trump, we don’t know much yet. Will the tariffs target specific products, or will they be applied across the board? That remains to be seen. It is also unclear whether these EU tariffs will mirror those applied to Canada and Mexico.

By now, most people recognize that President Trump embraces unilateral tariffs not just with the traditional motivation of protecting domestic jobs but as a tool of leverage  to address issues ranging from migration to drug trafficking, technology transfers, and, a new one in the growing list of grievances, to address the EU that was created “to screw the US,” according to the President.

His approach raises deeper questions: How do unilateral tariffs or the threat of such tariffs affect business investment? What are their long-term consequences? And, crucially, what will they achieve, or will they backfire on American firms and consumers?

These are complex questions, but economists who have spent decades analyzing trade policies and the consequences of protectionism find levying unilateral tariffs a risky and flawed strategy. Here are three key reasons why:

The United States, by virtue of its large market, has the power to inflict significant damage on smaller economies through unilateral tariffs. We saw this recently when Colombia scrambled to avoid a 25% tariff on its exports, fearing economic disruption and job losses. However, the short-term pressure the U.S. can exert is likely fleeting. Initially, some trading partners may concede or seek to negotiate – UK Prime Minister Starmer is the last one hoping for an exception from the cascade of tariffs. Over time, however, most will adapt by coordinating with others to retaliate. The logic is straightforward: smaller players do not engage a dominant economy alone. Instead, they form coalitions.

This is precisely the kind of escalating trade war that the rule-based global trading system was designed to prevent. A stable trade system relies on large countries showing restraint and abiding by rules. This encourages other countries to engage and trade. If the U.S. wants to curb forced technology transfers or negotiate stronger intellectual property protections, it needs allies, not antagonism, to shape trade rules that constrain China or other actors.