President Donald Trump now finds himself trapped between two sources of humiliation. If he backs down from his latest round of tariff aggression—sweeping tariff on imports from more than 180 countries—he will reinforce the market narrative that has branded him Supreme TACO (Trump Always Chickened Out), a label that mocks both the overreach of his trade war and his reluctance to face its consequences. Yet if he refuses to reverse course, he risks an even more damaging blow: a constitutional defeat at the hands of the US Supreme Court.

This confrontation stems from a landmark ruling by the US Court of International Trade (CIT) on May 28, 2025, which held that Trump had overstepped his authority under the International Emergency Economic Powers Act (IEEPA) by invoking national emergencies to justify blanket tariffs on global imports —tariffs the court declared unlawful and permanently enjoined.

Trump has stretched the definition of emergency to justify his tariff aggression—up to 145% on Chinese goods in early April (later reduced to 30% following limited negotiations) and escalating duties on imports from Mexico, Canada, the EU, and Asia—while also implementing a 10% global tariff on more than 180 countries starting April 5, 2025, under IEEPA.

The USCIT rejected the administration’s claim that threats related to health, migration, and reciprocity constituted valid grounds for emergency economic action. In doing so, it placed sharp legal limits on the use of IEEPA for trade measures and set the stage for a historic test of presidential power in the realm of global commerce.

The issue is not merely the legality of the tariffs but the broader constitutional question of how much authority the US president can wield over the global economy without Congressional oversight. Under IEEPA, the president can act during times of ‘unusual and extraordinary threats’, a threshold originally designed for national security crises.

Trump’s tariffs, intended to punish foreign exporters, have instead disrupted global trade flows—without yielding meaningful economic gains for the United States. Indeed, the costs of this second wave of tariffs have fallen squarely on American businesses and households. According to a recent study by the Peterson Institute for International Economics, the average U.S. household now pays over $1,200 annually due to higher prices caused by tariffs. US importers are hit first—they pay the tariffs upfront—but the burden swiftly passes to consumers in the form of higher prices for electronics, furniture, apparel, and even essential goods like medicines and groceries.

For small and medium-sized American firms that depend on imported inputs, the tariffs amount to a production tax—eroding profit margins, triggering layoffs, prompting relocation, and in many cases, forcing businesses to shut down altogether. In the manufacturing sector, higher input prices have eroded competitiveness, particularly for companies that are part of global supply chains.

Despite the tariffs’ politically stated goal of protecting American jobs, the U.S. manufacturing trade deficit has not narrowed meaningfully. In April 2025 alone, the total US trade deficit of goods and services stood at $61.6 billion, with strong imports continuing despite tariff hikes.

The uncertainty created by these policies has further chilled investor sentiment. The S&P 500 ended nearly flat on June 17, reflecting broader market unease. Goldman Sachs estimates that foreign investors sold approximately $63 billion in US equities, over March and April this year, citing concerns about policy unpredictability and a deteriorating trade environment. Global investment flows have also weakened in response.

In Business Insider’s June survey, 54% of investors said they believed international equities would be the best-performing asset, compared to just 23% who believed US equities would be the top performers. The survey also reveals a sharp deterioration in business sentiment, with 41% of CEOs expecting to reduce employment over the next six months, up from 29% in the previous quarter. Trump’s tariffs, meant to punish foreign exporters, are disrupting global trade patterns without delivering any gains in the US.

Yet, the political narrative persists. Trump continues to blame Asia, especially China, for American job losses, a claim that oversimplifies a far more complex reality. As numerous studies and official assessments confirm, the vast majority of US manufacturing job losses in the last two decades are due to automation, not offshoring. Between 2000 and 2010, 5.7 million manufacturing jobs were lost in the U.S.—but 87% of those losses were driven by advances in technology and shifts in domestic demand. The decades-long trend is clear: the manufacturing share of US employment has been declining for 70 years and stood at 8% as of May 2025.

Tariffs cannot reverse automation; what they do is raise costs and provoke retaliation, hurting the very workers they claim to protect.

The USCIT’s ruling should serve as a wake-up call. It reminds both Americans and the global community that there are limits to unilateralism, and that the rule of law must constrain even the most powerful offices. If upheld by the US Supreme Court, the decision will restore balance between the executive and legislative branches and reestablish legal clarity for international economic policy.

But if the ruling is overturned, it would set a dangerous precedent: that any US president could declare an economic emergency for political purposes and wield sweeping powers over trade and investment. Such a shift would undermine the credibility of US institutions and inject lasting uncertainty into the global economy.

The world cannot afford a breakdown in the global trading system. With global growth slowing, debt burdens rising, and geopolitical tensions running high, a return to tariff escalation and executive overreach risks deepening uncertainty and tipping the balance toward a global recession.

The global community must take a stand: trade must be governed by law, not command. Let international rules—not pressure or fear—shape how nations engage: openly and fair. The outcome of this legal battle in Washington’s halls will echo across global trade’s rises and falls. It may shape the rules for decades ahead. The world is watching where justice is led.

While the legal overreach is now under judicial scrutiny, the economic damage unleashed by Trump’s tariff is evident—widespread, deepening, and long-lasting.

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Lili Yan Ing
Secretary General of the International Economic Association (IEA)
The views expressed here are personal