Supreme Court tariff ruling increases China’s influence ahead of Trump-Xi summit

Analysts say the U.S. Supreme Court’s decision to cancel President Donald Trump’s wide-ranging tariffs will strengthen China’s hand ahead of a summit with President Xi Jinping, with Beijing expected to seek a reduction in U.S. support for Taiwan.

In Friday’s ruling, the court said President Trump had improperly invoked the International Emergency Economic Powers Act (IEEPA) to impose broad tariffs.

Wendy Cutler, senior vice president at the Asian Social Policy Institute, said the decision weakened Trump’s negotiating power as he prepared to visit Beijing in April.

“He’s effectively had his signature economic policies knocked off his back,” said Cutler, a former U.S. trade representative.

President Trump will visit China from March 31st to April 2nd, marking the first visit by a US president since his last visit in 2017. President Xi is also scheduled to make a state visit to Washington later this year.

Analysts said the ruling could change the dynamics over efforts to extend a trade ceasefire negotiated last year and complicate President Trump’s push for Beijing to buy large quantities of U.S. soybeans, Boeing planes and energy exports.

“This limits President Trump’s ability to impose tariffs at will, reducing pressure on Beijing to increase its soybean purchases and ease access to rare earths,” said Dan Wang, China director at Eurasia Group.

Beijing could use this opportunity to pressure Washington to ease technology export controls, remove certain Chinese companies from U.S. sanctions lists and reduce arms sales to Taiwan, said Xinbo Wu, director of Fudan University’s Center for American Studies.

“(The ruling) will certainly help strengthen China’s position in negotiations with the United States,” Wu said.

Experts say Trump’s tariff powers may be slightly reduced, but he could use non-tariff measures such as technology regulations or sanctions against Chinese companies as a negotiating tool.

“Measures that have substantial structural effects are still non-tariff instruments,” Wang said. These include expanded export controls on advanced chips and broader restrictions on Chinese tech companies, Wang said.

He added that the US position on the Taiwan issue, disputes over the South China Sea, and security relations with Japan and South Korea remains largely dependent on President Trump.

China’s Ministry of Commerce said in a statement on Monday that it was currently assessing the impact of implementing the ruling, while calling on the United States to eliminate all unilateral tariffs on trading partners.

“China and the United States both stand to gain from cooperation and lose from conflict,” the ministry’s statement, translated by CNBC, said.

In response to the Supreme Court’s ruling, President Trump responded by imposing a 10% worldwide tariff under Section 122 of the Trade Act of 1974, but later raised the tariff further to 15%, which the president said would be “effective immediately.”

Trump warned in a Saturday post on Truth Social that additional tariffs would follow, saying, “In the coming months, the Trump Administration will determine and issue new legally permissible tariffs.”

It remains unclear whether an official document detailing the timing was signed. The initial 10% tariffs are scheduled to go into effect on Tuesday, February 24 at 12:01 a.m. ET, according to a White House fact sheet released Friday.

Prior to this ruling, the U.S. government had imposed additional 20% tariffs on Chinese exports last year, including a 10% reciprocal tariff and a 10% fentanyl-related tariff, citing IEEPA officials. According to Goldman Sachs, the Supreme Court’s ruling means that U.S. tariffs on China will effectively be reduced by about 5%.

“Overall, this development suggests upside risks to our positive outlook for Chinese exports this year,” Goldman said.

A study by trade watchdog Global Trade Alert also named China the top winner under the revised Article 122 tariff regime, with tariffs reduced by 7.1 percentage points.

John Gong, a former consultant with China’s Ministry of Commerce, said Beijing “doesn’t stake its strategy on disputes between the executive and judicial branches of the (U.S.) government, although lowering tariffs is a ‘must have’.”

The Office of the U.S. Trade Representative last October said that despite repeated U.S. engagements to address implementation concerns, China does not appear to be following through on its commitments to expand market access, lower non-tariff barriers and increase purchases of U.S. goods and services.

“Section 301 provides considerable flexibility in applying tariffs and other measures when the United States determines that a particular country is an ‘unfair’ trading partner,” said Deborah Elms, director of trade policy at the Heinrich Foundation.

China said on Monday it was “closely monitoring” US efforts to use trade investigations to maintain tariff increases and vowed to “resolutely protect” China’s interests.

Scott Kennedy of the Center for Strategic and International Studies said the ruling may have limited impact on broader U.S.-China relations, noting that tensions extend beyond tariffs.

“The[Supreme Court’s]decision won’t upend the U.S.-China relationship as much as the U.S.’s relations with its allies and other countries, because China already has the upper hand,” he said.

President Kennedy expects the April summit will yield limited results, such as extending the ceasefire and selling American products, but says progress on difficult issues such as clear guidelines for export controls and rebalancing China’s economy is unlikely.

In a phone conversation earlier this month, Xi insisted to Trump that Taiwan was the “most important issue” in U.S.-China relations, which overshadowed a trade deal Trump touted at the time that included China’s purchases of U.S. energy and agricultural products.

Mingxin Pei, a political science professor at Claremont McKenna College, said future talks between the two leaders could be more political than economic.

Mr. Pei said Mr. Xi might be “open to giving President Trump a better trade deal” in exchange for a statement on Taiwan that would allow Beijing to claim victory.

— CNBC’s Elaine Yu contributed to this article.