Trump insists trade deals will happen after the Supreme Court ruling, but partners aren’t so sure

President Donald Trump defended his tariff agenda in his State of the Union address on Tuesday, after a Supreme Court ruling striking down his emergency tariffs has sparked new confusion about trade deals negotiated with global partners.

The court ruled last Friday that the president exceeded his authority by imposing tariffs on goods from every country in the world under the International Emergency Economic Powers Act (IEEPA). Trump has said he plans to do so again within the limits of the law.

Almost immediately, Trump replaced it with a 10% tariff under Section 122 of the Trade Act of 1974, which took effect Tuesday. He had threatened to raise it to 15% tariffs under Section 122, but it was not clear when they would come into force.

The ruling has raised questions about bilateral trade agreements structured around IEEPA tariff rates, prompting foreign governments to reassess their positions.

″(Trade partners) offered concessions in exchange for specific tariff treatment underlying the IEEPA. That legal basis no longer exists,” said Johannes Fritz, CEO of the St.Gallen Endowment for Prosperity through Trade.

“It remains to be seen whether the administration can rebuild those businesses under Section 301 or other authorities, but that will take time and new legal processes,” Fritz added.

Section 301 of the Trade Act of 1974 requires the US Trade Representative to conduct a formal trade investigation into unfair trade practices before imposing tariffs.

“Countries that were poised to make deals with the United States after last year’s Liberation Day tariffs are holding the bag,” Sarang Shidor, director of the Quincy Institute’s Global South program, told CNBC’s “Inside India” on Monday.

“Other countries that have resisted, like Brazil and others, may feel a little more justified in acquiescing to any demands of the United States,” he said.

Alicia García Herrero, chief economist for Asia Pacific at Natixis, said countries that had not negotiated tariff cuts could now benefit more.

He cited Japan, which last year secured a deal to cut reciprocal tariffs to 15% in exchange for a $550 billion investment pledge.

“They (Japan) are now paying to get the same treatment as everyone else,” Herrero said after the court’s ruling boosted Trump’s tariff agenda.

Universal tariffs of 10% could impose “additional tariff burdens on some goods,” Japan’s Trade Minister Ryoshi Akazawa said on Tuesday, urging Washington not to treat Japan less favorably than in last year’s trade deal.

During his State of the Union address, Trump claimed that “almost all countries and corporations want to keep the deal they already made before the unfortunate involvement of the Supreme Court.”

However, the reality looks a little different.

India has paused plans to finalize an interim trade deal just days before a trip to Washington, DC, on Tuesday, with Indian Minister Piyush Goyal saying his country would resume talks when there was more clarity.

On Monday, the European Parliament postponed a second vote on the trade deal, which would set a 15% US tariff rate on most EU goods and eliminate European tariffs on many American imports, including industrial goods.

Bernd Lang, chairman of the European Parliament’s international trade committee, told CNBC on Tuesday that the US had violated the terms of its agreement and that the bloc was ready to retaliate if necessary. European officials have expressed concern over the latest levy, suggesting it could threaten a trade deal signed last summer.

EU lawmakers are expected to meet again on March 4 to assess whether Washington has clarified its position and commitment to last year’s deal.

Canada also welcomed the ruling, with regional leaders in British Columbia and Ontario calling it a positive step. Doug Ford, the premier of Ontario, Canada’s most populous province, said Monday that “the walls are closing in” on Trump and that no deal is better than a bad deal.

Trump has warned countries against backing out of past deals, saying any country that wants to “play games” will face more duties under different trade laws.

In a Truth Social post on Monday, Trump said he may impose license fees on business partners. US Trade Representative Jamieson Greer said the Trump administration expects to open new Section 301 investigations in several countries, a legal step that could pave the way for new tariffs.

Most foreign leaders appeared to be in cautious wait-and-see mode, reassessing their positions and reconsidering the timing of renegotiating some of the terms of their agreements, given the more limited tariff threats that Trump can now credibly make.

Mexican President Claudia Schönbaum said her government would carefully review the court’s decision to assess its scope and impact.

A spokesman for China’s Ministry of Commerce said on Tuesday it would engage in “honest dialogue” in the next round of bilateral talks during Trump’s planned visit late next month.

Beijing said it would “thoroughly assess” any development from Washington and decide whether to adjust its countermeasures against the US-imposed reciprocal and fentanyl-related tariffs.

As foreign governments weigh their responses, attention is turning to the options left to the White House.

With tariffs cut under the IEEPA, the administration is exploring alternative legal avenues to preserve its trade agenda.

But putting together an alternative plan will take time, meaning the tariff-fueled confusion weighing on the global economy could continue.

To date, the Trump administration has negotiated various agreements, frameworks and joint understandings related to trade and tariffs with eighteen countries, said Jennifer Hillman, senior fellow for trade and international political economy at the Council on Foreign Relations.

“The tariff landscape, and therefore bargaining positions, remain in flux,” Hillman said.

The Trump administration has indicated its plans to use Section 301 investigations and Section 232 of the Trade Expansion Act of 1962, which allows tariffs on imports deemed a national security threat to impose new tariffs against trading partners.

Any changes to existing agreements are likely to unfold gradually, Hillman said, as none are fully finalized or binding and have not received congressional approval.

— CNBC’s Lim Hui Jie contributed to this report.