During his first term, US president Donald Trump frequently argued that countries such as India and China imposed higher tariffs on US exports than the US imposed on theirs. To address what he viewed as an imbalance, his administration proposed a “Reciprocal Trade Act” which was a move that drew strong opposition from the US Chamber of Commerce during his first term. Subsequently on 2nd of April 2025, during Trump’s second term, , he declared a national emergency over the U.S. trade deficit and invoked the International Emergency Economic Powers Act (IEEPA) to unilaterally impose reciprocal tariffs.
However, on 20th February 2026, the US Supreme Court ruled by a 6-3 majority against President Donald Trump’s reciprocal tariffs, holding that the International Emergency Economic Powers Act (IEEPA) did not grant the authority he claimed to impose such measures. In response, Trump described the decision as deeply disappointing and announced plans to replace the invalidated measures with a global duty initially set at 10%, which was subsequently increased to 15% under alternative legal authority.
What could this mean for the global economy and trade?
Broadly, these developments could mean that volatility in the global trading system is likely to continue, with several implications for the global economy as well. While the US Supreme Court ruling provides some reassurance to trading partners regarding the limits of the unilateral executive action, President Trump’s rapid replacement of the struck-down tariffs with a 15% global duty under an alternative legal authority signals that policy uncertainty could remain a central concern for all stakeholders.
The ruling also raises potential long term complications for businesses and importers as it did not clarify how the refunds for tariffs already paid should be handled. Recovery of these duties could possibly take several years, leading to prolonged uncertainty and creating a complex legal environment for international trade.
For global trade more broadly, the reinstated tariffs could slow the flow of goods, increase costs for importers and consumers and lead to some sort of supply chain interruptions particularly for export-dependent economies such as China, India and other major US trading partners. Uncertainty over which trade agreements will survive under the new tariff framework may discourage potential investments and long-term strategic planning, while the risk of reciprocal measures or similar unilateral actions by other countries could further undermine the multilateral trading system and fragment global trade networks. Overall, these developments could mean a possible shift away from predictable, rules-based trade toward a more uncertain global environment, with possible negative consequences for economic growth, stability and international cooperation.
How will Sri Lanka be impacted from this?
For Sri Lanka, the US tariff situation carries very direct economic implications as the United States is one of the country’s largest export markets, particularly for garments and textiles. Sri Lankan exporters had previously secured a 20% tariff rate on apparel exports to the US, down from steep reciprocal duties earlier proposed under Trump’s original tariff regime which was seen as a critical concession to maintain competitiveness against regional rivals like Vietnam and Bangladesh.
However, recent developments have disrupted the previously negotiated framework, placing Sri Lankan exporters in an uncertain position. Without a secured bilateral trade deal, Sri Lanka remains sensitive to such unilateral shifts in US policy, as uncertainty over tariff rates could complicate pricing decisions and long‑term contracts with US buyers, who make up for a significant share of Sri Lanka’s export volume. As a result, the current situation highlights the importance of strategic diversification and stronger trade agreements to mitigate the impact of continued US tariff volatility on Sri Lanka’s apparel sector which is a key driver of foreign exchange earnings and employment.