Renewed turbulence in US trade policy is once again unsettling global markets, following a Supreme Court ruling that struck down President Donald Trump’s import tariff measures. In response, the president sharply criticised the judges involved and swiftly announced a new global tariff of 10 percent, later signalling that the rate could rise to 15 percent.
The only formal action taken so far is an executive order imposing a 10 percent ad valorem import duty on goods entering the United States for a period of 150 days. Given the repeated reversals and sudden shifts that have characterised the administration’s trade policy, it remains extremely difficult to anticipate what tariff levels will look like once this temporary period expires.
What is already clear, however, is that the unpredictability surrounding US tariffs is encouraging caution among businesses and investors worldwide. This hesitation is likely to slow trade and weigh on economic activity, with consequences that extend far beyond the United States.
Questionable grounds for emergency powers
In early April 2025, the president declared that the United States was facing an economic emergency, a move intended to justify broad tariff-setting powers. To do so, the administration relied on the International Emergency Economic Powers Act of 1977, which allows the president to take extraordinary economic measures during a national emergency.
This justification was widely questioned. Many analysts expressed doubt that the US economy was experiencing an emergency severe enough to warrant such action, and tariffs were broadly viewed as an ineffective response even if such conditions had existed.
The primary rationale offered for the tariffs was the country’s persistent current account deficit, reflecting the fact that the United States imports more goods than it exports. Economists have repeatedly noted that tariffs are ill-suited to addressing this imbalance, arguing instead that fiscal measures, such as reducing the government budget deficit, would be more effective.
A shifting legal and trade landscape
The tariffs announced in April proved short-lived, particularly those affecting the European Union. Initially, EU imports were subjected to a 20 percent tariff. Following sharp market reactions, a 90-day suspension was introduced just a week later. By mid-July, a new announcement set tariffs at 30 percent, scheduled to take effect in August.
Later that month, negotiations between Washington and Brussels resulted in a trade agreement that eliminated some tariffs and capped others at 15 percent. This deal was widely expected to restore stability to transatlantic trade relations.
That expectation has since faded. The agreement, which was awaiting ratification in the European Parliament in late February, has been put on hold following the president’s response to the Supreme Court ruling.
At present, most EU goods face a 10 percent tariff under provisions of the Trade Act of 1974. This legal route allows only temporary trade restrictions, explaining the 150-day limit. What happens next remains uncertain. Questions persist over whether the European Union will retaliate and whether a renewed tariff conflict could emerge. There is little confidence that tariff levels by the end of the summer can be predicted with any reliability.
Investment decisions under strain
For exporters, this uncertainty carries real costs. Even under stable conditions, entering the US market requires upfront investments, including regulatory compliance, legal advice and product adaptation. These costs can only be justified if firms can reasonably estimate future revenues.
Higher tariffs raise prices for US consumers and businesses, reducing demand for imported goods. While consumers pay more, exporters do not benefit from the increase, as the additional revenue flows to the US government. When tariff levels fluctuate unpredictably, firms cannot determine whether exporting will remain profitable by the time goods reach US ports.
As a result, companies face the prospect of tariffs ranging anywhere from zero to 20 percent over the course of a single production and shipping cycle. This lack of clarity is already prompting many firms to postpone, scale back or cancel planned investments.
Broader economic consequences
Extensive research has shown that uncertainty in economic policy undermines investment, consumption and growth, while also reducing government revenues. The current situation echoes other periods of global disruption, including financial crises, pandemics and geopolitical conflicts.
While uncertainty is an unavoidable aspect of business, prolonged and widespread doubt discourages investment across the economy. Without sustained investment, innovation slows, productivity suffers and long-term economic growth becomes harder to achieve. In that sense, the fallout from tariff instability may prove more damaging than the tariffs themselves.
